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HomeMy WebLinkAbout2004-10-21 - Agendas - Final I • Police Pension and Relief Fund Board of Trustees Agenda Actober 21, 2004 A meeting of the Fayetteville Policemen's Pension and Relief Fund Board will be held on July 15, 2004 at 1 :30 p.m. in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. 1 . Roll 2. Approval of the Minutes of the July 15, 2004 Meeting 3 . Approval of Pension List for August, September and October 2004 4. Investment Report 5. 2003 Actuarial Valuation Report 6. Policemen's Pension Board Term End Date Change 7. Procedure for Notification of Deaths 8. Fire & Police Academy Conference d O f.1 F m d V m •L t 3 N (� f- m d (� O O c LL S N to •• o O c 0 LL' = o o d m m d £ u`, c o o m R o tq m H O v1 N g g W K H o N a o of ®• c m m 'o c LL d 4 c L l6 C 0 N � C m CL w c .o c G 0 m c o v od d .0 V F m d („) m 'C L O c O a LL 2 A y 6 0 o O O 'O LL S A y 7 R 3 0 o d m m E d c o o LL N 22 N 2 O N 2 y K F O N 4 r- Policemen's Pension & Rdief Fond Board of Trustees Meeting Minutes July 15, 2004 Page 1 of 11 • Police Pension and Relief Fund Board of Trustees Meeting Minutes July 15, 2004 A meeting of the Fayetteville Policemen's Pension and Relief Fund Board was held on July 15, 2004 at 1 :30 p.m. in room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. PRESENT: Randy Bradley, Jerry Friend, Dr. James Mashburn, City Clerk Sondra Smith, City Attorney Kit Williams, Shelly Turberville, Chief Rick Hoyt and Eldon Roberts. ABSENT: Mayor Coody, Tim Helder and Jerry Surles. Randy Bradley called the meeting to order. • Approval of the April 29, 2004Meeting Minutes: Dr. Mashburn moved to approve the minutes. Jerry Friend seconded the motion. Upon roll call the motion passed 4-0. Mayor Coody, Tim Helder and Jerry Surles were absent: Approval of Pension List for May, June and Julv 2004• Sondra Smith: The difference between the June report and the July report is the supplemental amount. The supplemental amount is not on the July Pension Report because our accounting department has not received the check from the State; therefore the July amount paid to the pensioners is less than the amount paid in June. Eldon Roberts: That is retroactive to when it comes in so nobody losses anything. Dr. Mashburn: How does this work I noticed you have Federal and State tax listed is that deducted from the amount the pensioners receive? Sondra Smith: Yes sir, the pensioner fills out the forms to make the necessary deductions. Jerry Friend: That doesn't necessarily reflect what you have to pay. • Dr. Mashburn: That is just on the amount of pension fund they are receiving from the City. Sondra Smith: Yes sir, it is just like a payroll check you let them know how much you want to have deducted. Policemen's Pension 6 Relief Fund Board of Trustees Meeting Minutes July 15. 2004 Page 2 of J I Jerry Friend moved to approve the Pension List for May June and July. Dr. Mashburn • seconded the motion. Upon roll call the motion passed 4-0. Mayor Coody, Tim Helder and Jerry Surles were absent. Supplemental Benefits Letter: A copy of the letter that was sent to the pensioners letting them know that we had not received the supplemental benefit funding amount for this year was given to the Board. Chief Rick Hoyt Retirement: Dr. Mashburn moved to approve Chief Hoyt's retirement. Sondra Smith seconded the motion. Upon roll call the motion passed 4-0. Mayor Coody, Tim Helder and Jerry Surles were absent. Frank Skelton Death Certificate — Benefits now go to spouse Frieda Skelton: Sondra Smith: The death benefit check has been sent. His spouse Frieda is now drawing 50% of his benefits. Jerry Friend: 1 thought the windows benefits had changed to 90%. Eldon Roberts: That is something this board needs to look at. Jerry Friend: Kit pretty much told us that you can't increase the amount to 90% but I thought that had changed. Kit Williams: The last time we looked at it the amount was 501/o. Whether they have changed the law since then 1 am not sure. If you did increase the benefit to widows you would have to ask your actuaries to see if that would be actuarially sound to do that because that would be a benefit increase. Jerry Friend: I may have taken a nap and had a dream but I thought that it was mandatory. Kit Williams: We had a case on it and the judge found as I thought the judge would that there were options on this. Whether the legislature has changed it now or not I do not know that has been a couple of years ago when we did that. Sondra Smith: I think Kit received an Attorney General's Opinion on the amount of benefits. Jerry Friend: I thought his opinion said we could not lower the widow benefits to 50%. Sondra Smith: According to Kit's memo it had to be 50%. Policemen's Pension & Relief Fund Board of Trustees Mating Minutes July 15, 2004 Page 3 of 11 • Kit Williams: The case I was speaking of involved dependents not a wife, the wife was divorced from the pensioner at the time of his death. She was not allowed to draw his pension his children are receiving the pension instead of her. Jerry Friend: I think I went home and told my wife the good news that she would get 90%. Randy Bradley: I don't think we have changed it. Eldon Roberts: I know you haven't changed it but I'm not so sure that this board hasn't got the authority now to change it. The benefit increase study has already been done on that salary increase. When we did our benefit increase proposal to go to 90% of salary or whatever we could have gone to 100% of salary, they granted us 1001/o of salary. They included widows in that, they went on to say that they would prefer that we do 90% because it would be more financially responsible. It might not pass today but it did then. I think there is a new law that was passed at the last legislative session that allows you to do that if your board votes to do that. Kit Williams: I think that is correct, I think they did open the door on that. Dr. Mashburn: You have to show that it is financially sound to do that. Kit Williams: 1 I think you would still have to go back to the actuaries even though it might have been that way in the past. • Eldon Roberts: And that might cause a problem. Jerry Friend: I thought we covered this ground. Eldon Roberts: That might cause a problem now to be actuarially sound. We just got the new report from the actuary and all three of those columns were checked no. Are we fully funded, are there enough liabilities on hand, and is this plan considered actuarially sound no. Kit Williams: Well let's not ask for an increase in benefits then because it is not going to happen. Election Results: Jerry Friend and Jerry Surles: Sondra Smith: The winners are Jerry Friend and Jerry Surles. Police Pension Fund Deposited at the City — Email from Patricia Leach, Accounting: Shelly Turberville: We have three different places the money is deposited.. Arvest Bank is the fust place and we usually try to keep around $2,000 in that account unless we know that the 15a' • is nearby and we are going to cut checks then we might let that stay in the account for a week or two. Once the account has around $4,000 to $5,000 in it then we move some of that money to Gamer. We can keep up to $ 100,000 in Garner and then the next time we cut the pension check instead of drawing it down from Longer we draw it down from Gamer. Policeman's Pension .@ Relief Fund Board of Trustees Meeting Minutes July 15, 2M4 Page 4 of I I Kit Williams: Does Garner give you a better rate? Shelly Turberville: It depends, right now I believe so. Eldon Roberts: So the only question that we would have is all the different places that we are keeping this money whatever it earns is that coming to the pension fund? Shelly Turberville: Exactly. Eldon Roberts: I assume it earns some interest at every one of those places. Shelly Turberville: It does. Dr. Mashburn: is it transferred routinely? Shelly Turberville: The interest is paid monthly from Arvest Bank and Gamer. The interest rate in June for your allocation of the money was $335.00. Randy Bradley: That goes where? Shelly Turberville: It goes back into your police investments that the city is holding. Randy Bradley: Our pool here at the City? • Shelly Turberville: Yes. Eldon Roberts: Is there other City funds involved in this? Shelly Turberville: When we send money to Gamer yes, but we allocate the interest depending on how much money you have in Gamer, you get your portion and it stays in your account, it doesn't go to anyone else's account but yours. Randy Bradley: Then once you reach $100,000. . . .. Shelly Turberville: Then we draw it down to pay for the next set of pension checks. We can not put it in Garner and send it directly to Longer if you so choose. That was the guidelines that were given to me when I took over this position. Randy Bradley: This is money in addition to the $ 100,000? What is still being paid in? Shelly Turberville: No, what builds up is the amount of money that is taken out of the checks that the existing police have and then any tax money that we receive. Kit Williams: Tum back money. Shelly Turberville: Yes. Jerry Friend: So we don't bring enough in anymore to have an excess to send to Longer Policemen's Pension & Relief Fund Board of Trustees Meeting Minutes July 15, 2004 Page 5 of 11 • Shelly Turberville: We are getting more money from Longer and I think that is the way it is going to be from now on. Eldon Roberts: Are we paying Gamer anything to handle these funds. Shelly Turberville: It is kind of in the pool of the entire City's money their fee is adjusted into that and fhen the interest is allocated appropriately to the amount of money each account has. Eldon Roberts: How would we be any better off in giving it to Garner than giving it to Longer? Shelly Turberville: I think right now with the stock market Garner is making a little bit better interest rate. I don't have those figures with me. Kit Williams: It is also more liquid as Longer does much longer term investments. . Elaine Longer. It sounds to me like they can handle those smaller inflows and outflows. We would prefer to handle bigger inflows and outflows. It sounds to me if it is $ 100,000 on down it is really like a checking account. If there was going to be coming and going out fairly quickly, the things that we buy I would pretty much have to allocate it as cash on the books to be able to have the cash ready as you need it. That gets you into short term interest rates so we wouldn't be able to get excess return over what you are getting because this sounds like its just liquid money that has to stay liquid. • Jerry Friend: Why would Gamer charge a fee? Kit Williams: Because they handle most of the cash for the city. Jerry Friend: The banks hold cash and pay you. Shelly Turberville: Gamer has some in money market but they are also investing money too. I really think they are doing okay. I would have to come back with the exact figure of how much it's making. Jerry Friend: So it is not in an interest bearing account. Kit Williams: They do a lot better than just a bank. A discussion followed on the amount of money banks pay and the amount that Garner pays. Shelly Turberville: At the end of May in Gamer the Police had $77,554 and the interest that was made was $335 on that money. Jerry Friend: I though it was just like a saving s account, the fees come from the trades. • Elaine Longer: It sound to me if that is the interest rate on it for a month then you are probably buying into a pool fund. Among all of that you have some liquid funds there to allow for distributions. It sounds to me like you are buying into a bond portfolio that has more interest than investments so you are getting a higher interest rate and you still have liquidity. Policemen's Pension & Relief Fund Board of Trustees Meeting Minutes July 15, 20C4 Page 6 of 11 Dr. Mashburn: Is Gamer the agent. • Kit Williams: It is a company. Dr. Mashburn: Elaine what do you do with your spare cash? Do you keep it invested? Elaine Longer: We don't have spare cash usually. We keep it invested. We have some cash now but close to the quarter we won't have much cash. Usually we don't deal with cash except what we need to. Kit Williams: So it is really a pretty good three tier system, you have your checking account, your short term money and then your long term money. Jerry Friend: Who keeps all the book work on this for the City? Shelly Turberville: The City and Gamer. Garner sends us a report and then we go over their report. Investment Report: Elaine Longer: We will go through the reports and then I would like to talk a little bit about the outlook as we go into the second half of the year. • There are a lot of cross currents in the markets right now. We have a lot of good things happening as far as economic growth, the earnings, capital spending and productivity improvements are running higher than usual. You have a lot of good news but then on the other side of the equation you have some of the risk that we detailed in our year end newsletter relating to higher energy prices, weaker dollar, political risk, with an incumbent president that may be threatened and geopolitical risk with what is going on internationally. Those things keep popping up to the front page and it is offsetting the good news about what's going on in the economic in earnings. So we are at an absolute dead stand still. Through yesterday's trading every market index is down year to date even though earnings in the first quarter were up 25% and for the year they will probably come in up 17%. The NASDAQ is down about 5%, the DOW is off about 2 '/z% and the S&P is down about I %. You have sort of a stalemate as the good news keeps coming. Some of the negatives are holding people back from being very aggressive. I really think this could go on until we get some clarification in the election results and also in Iraq before people will get back on the band wagon and start feeling a little more like risk takers again. The market typically moves in advance of what it's discounting so 1 think that sometime this summer we will discount a Kerry election. That is not to say that he is going to be elected but I think the markets will move to fully discount that and then trade up into the elections. I would think that by the time the elections come we will probably already hit our low. That is not a political statement that is just historical fact. An incumbent president that gets reelected causes the market to have a much better year than an incumbent president of either party that doesn't get elected. That's because the market likes certainties and it does not like uncertainties. There are a lot of policy differences .between the two parties in this presidential election that do have an r Policemen's Pension & Relief Fund Board of Trustees Meeting Minutes July 15, 2004 Page 7 of 11 • impact on the stock market and the valuation attached to stocks. The tax rate passed by the Bush Administration on dividend income and capital gains taxes will lapse this year so they have to be reinstated to go forward with those same tax rates. If you have a Kerry administration you probably will not have the push to have those tax cuts reinstated. What that means basically is that you have to apply a higher discount rate to the markets earnings and dividends to account for the higher tax rate which means lower price. So, in this particular presidential election there is a big difference between the two administrations as far as stock market valuation is concerned. The first report is the combined portfolio stocks and bonds. At the end of the quarter you ended at 47.6% stock which is right up by your 50% limit. Since then we've had a few positions that we've taken profits on. I've talked about this in previous meetings where we are holding core positions of stocks at about 40% of total portfolio and then around that we will occasionally add on trading positions in the DOW, S&P and the NASDAQ index proxies. That allows us to increase asset allocation to equities by using those tools when we feel that it is advantageous to do so. If the market looks a little bit slippery we can take off those investments very quickly and not have to subject the portfolio to trading 10 or 15 different stocks and lighten up across different industries sectors. We keep our core at 40% of stocks and then we can add to it or subtract from it with the diamonds, spiders and the QQQ's which are the index traded funds that we use that are traded interday. At the end of the quarter you had a position of 47.6% but that included some of the indices that we use such as Standard & Poor's 500 and the NASDAQ 100 Index. Those have both been removed at this time and we are sitting with cash reserves. You have 5,500 shares of what's called the I-Share Lehman 20 plus year Treasury Bond Fund. We wrote about that at the start of the year the fact that we were defensively postured in our bond portfolios, sort of hugging to the shorter maturities anticipating a rise in interest rates, well we got it_ From March of this year where the ten year treasury was trading at 3.7% the yield rose to about 4.9% in June. We extended maturities by buying this particular fund that holds 20 year plus treasuries. The reason I use the fund instead of an actual treasury bond is because you have a higher income yield than we could get just buying a straight treasury in that same maturity. Also this is a fund that trades interday on the exchange, it is very liquid and so you have 4% of the total portfolio in the extended maturity bond fund. You are making about 5.35% interest and then as interest rates have backed off we've made about 2 '/2% capital gain appreciation on that. If we get back to about a 4% ten year yield we'll be taking profits on this position. This is a level also on the fixed income side of the portfolio where when the opportunity arises we were able to extend maturities, take on more of that price risk to get higher yield, but it keeps it liquid enough that we can also capture the gain as interest rates come back down. You have some bonds such as the 300,000 Federal Home Loan Bank with the 7 1 /8 coupon that matures in February 2005 that is essentially cash we can convert that to cash any time we want to. If you look at the positions that are near cash in the bond portfolio, they equal about 5% of total portfolio plus we have about 5% cash reserves. We really have 10% to use if the market backs off between now and the election either on the fixed income side or the equity side. Page 6 lists the stocks, we have the stock account and the bond account separated on our books for no particular reason that I can think of I am sure it dated back to where we first started and they were probably 50/50 and now they are about 60/40. This gives you the stock portfolio and Page 9 shows your five largest holdings, Johnson & Johnson, Intel, Pfizer, Cephalon, and Caterpillar. Even your largest holdings are just 2.3% of equity exposure and 1 .5% of total portfolio so you have a good diversification in your stocks. Policemen's Pension & Relief Fund Board of Trustees Meeting Minutes July 15, 2004 Page a of J I We reduced Intel last week to about 1 .9% because of the fact that the technology sector is • showing some weakness. Some of the comments coming out of the software manufactures and some of the technologies indicate that corporations have sort of pulled back a little bit on their capital spending in June and it is starting to be reflected in this quarter's earnings numbers. Intel reported this week and was down 10% on the earnings report. I always like to hear the comments the management is making and the comments are getting a little bit more cautious than what we heard in the forth quarter and the first quarter. This all really hit about mid June. We didn't see so much caution and the consumer has started to pull back it is kind of like every day you get another piece of the puzzle dropped in. People are sort of retrenching and I don't know if it is the higher energy prices the geopolitical uncertainness or the political uncertainness but there is something out there that hit about mid June that you can pick up in the numbers that is putting a cautious tone over the economic outlook. On your industry ratings, we have been underweight consumer at 9.7% versus 18 '/z% on the S&P 500 for the whole year and the consumer sector really not done very well this year and you are starting to see some signs in the market discount six months in advance. We are starting to see signs of the consumer pulling back and that's been discounted by the stocks since about January. Our concern coming into the year was the fact that we had not seen the impact of the higher gasoline prices yet. That is one thing that is hitting the consumer the second thing is we had anticipated higher interest rates which factor into home mortgage rates. A lot of what has been financing consumer spending in a period where we've had really flat job growth has been the refinancing bonanza, if you haven't refinanced yet it's over, now you have mortgage rates back up. That was providing a lot of cushion to stretch the family budget because every time they refinanced they could come up with another $300 a month to spend. With interest rates rising you've really clipped that and so you have the combination of rising energy prices, rising food prices the refinance bonus is gone. We will anniversary the tax cuts in this quarter and therefore the comparisons year to year are going to be soft. We have been under weighted in consumer and we are going to stay under weighted to see bow this all sorts out. A discussion followed on the supply and demand over the next few years of oil from around the world and the energy options that we may have to look at. We are over weighted on energy we have 11 .4% versus about 6.3% in the index. I still like energy even though we have had a really good move in so far, they pay good dividends most of them pay over a 3% dividend yield. You have inflation protection and then you also have some protection as far as the outlook in the Middle East. Whenever we have tensions over there the price of oil goes up so it's kind of a nice stabilizer in the portfolio. Morgan Stanley is at 2500 shares and I wanted to talk about that. We have talked about how we use stocks in putting on new positions especially if we are buying close to a very important technical support level. This minimizes the downside rise. Sometime we will buy stock and it's very close to a level that's maybe 2% away or 3% that we don't want to have violated, we will place a stop there and that stock was stopped out at $50. It is a slight loss but now it' s trading at $485 I think it will go down to about $42 given the technical break down in the stock and what's • happening in the stock market. I just wanted to use that as an example, that happened within about three trading days and over time this has really saved us a lot on the down side of stocks but against the realized gains that you have this year it's good to just continue to use that down side discipline. Policemen's Pension & Relief Fund Board of Tnntees Meeting Minutes July 15, 2004 Page 9 of I 1 • You are over weight on healthcare mostly though in the medical supplies and what I call parts and pieces, the companies that are making the knees and hips all the things that we are going to need as age. That's how your industry ratings break down we are under weight technology we've been under weight technology since 4d' Quarter. We are at 10% versus 16% in the index and I keep looking for the right time to increase that to get back to being index neutral but we just still haven't seen the conditions that would make me brave enough to take on that volatility. The technology stocks are getting hit a lot harder than the market over all so maybe at some point we will have that opportunity in the next quarter. Your average yield to maturity. is 5.7%, your average maturity is only 5.4 years and to give you a comparison the 5 year treasury right now is trading at about a 3 .66. We have extended maturities, this does not include the purchase of the I shares or the 20 year treasury fund that we bought because that's not listed as a bond on our portfolio reports but we did put about 4% of total portfolio into that 20 plus year maturity when interest rates got so high in June. That represents about 8% of the bond portfolio. The realized gains year to date through June 30 are $145,000. Net income which is just dividends plus interest is $ 153,000. The total income on the portfolio just dividends plus interest is now running at about $361 ,000 and that is still a 3.6% yield on the total portfolio. • The summary of withdraws year to date shows there are no contributions coming in but there is money going out to meet the payments for pensioners. The final report is the performance report. Basically last year we delivered about a '28% return on stocks even though the Federal Reserve did not increase short term interest rates the bond market increased the longer .term interest rates, so we had a rising interest rate year as far as the bond portfolio was concerned so the total return was 2.2%. You still earn the 5.7% interest income. but some of that price appreciation we had had in the prior three years was taken away in a rising interest rate environment, so that your total return was 11 . 1 %. Year to date the stock part is up 4% and through June 30th the S&P is up about 2% the DOW is flat and the NASDAQ is down so you are running a little bit ahead of the market. I think that is mostly due to the way we've weighted the portfolio plus the fact that we are using part of your funds opportunistically to add to the stock positions when we get to the lower part of the trading range and take it off when we get a little bit higher. . Your total return year to date is 1 .6% and compound annual return on the total portfolio is 7.2. What interesting is your stock return have been 6.8, bonds have been 6.3, but your total has been 7.2. That is due to asset allocation that is so important. I went back to look at that because what happens is during the down cycle where we had three years back to back of negative returns we were very light on stocks and heavily weighted on the fixed income side and during those years you had 9% bond return, 7.9 and 9.6. Last year we got more heavily weighted on the stock side where you had a 28% return less weighted on the bonds so your total return was 11 , more upside potential given that stock return than you had down side risk when stocks were down 28%. The reason that number is higher than the individual asset classes is the asset • allocation decision, how to weigh between bonds and stocks. In 1999 before we entered into a 3 year bear market the annual return compounded on stocks was 15.4% and the total was 12.82. After three years of negative return even though your total account was only down about 4. 1% during those three years just standing still for that long Policemen's Pension @ Relief Fund Board of Trustees Meeting Minutes July 15, 2004 Page 10 of 1 I reduced the annualized return from 12.8 to 6.5, that was at the lowest point coming off that bear market but still meets your actuary assumptions of 6%. Since then with two good years back to back so far that's brought your annualized return back up to 7.2. That is a little bit safer distance from that 6%. Your investment policy is attached the most important thing that we always want to consider is the asset allocation which in your case is equities 35 to 50 percent. I don't see any reason to change that but I always like to review that and make sure it is still appropriate with the client. It gave us enough flexibility in the bear market that we could get real light but then last year we were able to get back up to the 50% and participate. I think it is a nice range and we had felt comfortable in the past when we dipped below the 35% to come to you and say I don't see any reason to push the petal to the metal, we can do that again if we see the circumstances change but in the meantime I think it is a wide enough range it gives you the flexibility that you need. Eldon Roberts: I 've been noticing on the balance sheets that I receive; we are staying right up there. We keep maintaining pretty much a straight balance. We are up to $ 100,000 a month on pension liability. Jerry Friend: Did we get a copy of the actuary report? Eldon Roberts: The City surely did. Sondra Smith: We haven't gotten the 2003 one yet. Jerry Friend: I would like to have a copy when you get it. The actuary several years ago said if we maintain 6% even with our 90. . . .. Eldon Roberts: No, that is what I want to touch on, I have mentioned this before and I am not 100% sure that I am right. When that information was complied and the actuary said if you can maintain 6% a year on your money you are going to be fine. You will eventually be actuary sound and you will eventually be fully funded. I am almost positive that was if we maintained a 50% rate of pay. Jerry Friend: But then when we asked to go to 100% they couldn't purposely put us in the red. The actuary study to allow us to do that had to figure it would last. Eldon Roberts: Whenever they did that they didn't give us any ruling on what percent of return we should have every year to be able to keep this going. We are not growing now we are just maintaining. If we were only paying 50% of benefits we would be growing and we are not growing any right now. I think when that was complied I am almost positive that was paying 50% of benefits. Jerry Friend: We have to ask permission to increase the benefits we can't just do it. Elson Roberts: They did a cash flow not an actuarial study. • Policemen's Pension & Relief Fund Board of Trustees Meeting Minutes July 15, 2004 Page 11 of 11 Revised description of Policemen's Pension Board: A copy of the revised description of the Policemen's Pension Board was given to the Board. Sondra Smith: The term end dates for the Pension Board need to be changed to the end of May. We will put that on the next agenda. Northern Trust Option Account — Signed Copy: A signed copy of the Northern Trust Option Account was given to the Board. Meeting Adjourned at 2:30 pm. • • POLICE PENSION FUND August 2004 6900.9800 6800.9800 5335-00 533505 Future EMP# NAME GROSS YTD Wages Suppl. YTD Suppl. Suppl. Fed Tax ST. TAX NET rALLEN, CHARLES 2,296.42 16.074.94 100.00 300.00 649.80 220.00 66.89 2,759.33 ARNOLD, WILLADEAN 863.14 6,041.98 ' 100.00 300.00 649.80 1,612.94 130 BAYLES, DON 1,410.39 9,872.73 100.00 300.00 649.80 2,160.19 107 BLACK, JOE P 1 ,000.12 7,000.84 100.00 300.00 649.80 100.00 20.00 1,629.92 120-BOWEHffJ'R�z 616:10 4,312.98 100.00 300.00 649.80 10.00 1,355.94 147 BRADLEY, GERALD 4,282.59 29,978.13 100.00 300.00 649.80 940.53 217.32 3.874.54 139 BRADLEY, RANDALL 2,541 .22 17,788.54 100.00 300.00 649.80 382.00 100.00 2,809.02 167 BROWN, JOHN 3,875.58 27,129.06 100.00 300.00 649.80 600.00 200.00 3,825.38 157 CARROLL,RONALD L 1 ,871 .19 13,098.33 100.00 300.00 649.80 250.00 105.00 2,265.99 151 COLE, RUSTON . 2,723.87 19,067.09 100.00 300.00 649.80 600.00 200.00 2,673.67 109 COOPER, ADRIAN 567.23 3,970.61 100.00 300.00 649.80 1,317.03 108 DENNIS, WARREN 1 ,223.34 8,563.38 100.00 300.00 649.80 0.00 1 ,973.14 160 DUGGER,GARY 2,810.94 19,676.58 100.00 300.00 649.80 300.00 120.00 3,140.74 125 FLOWERS, HAROLD 766.42 5,364.94 100.00 300.00 649.80 1 ,516.22 140 FOSTER, BILLIE D. 2,849.68 19,947.76 100.0 300.00 , 649.80 300.00 120.00 3,179.48 148 FRIEND, JERRY 2,801.12 19,607.84 100.00 300.00 649.80 725.00 150.00 2,675.92 161 HANNA, JANICE 1 ,739.21 12,174.47 - 175.00 50.00 1,514.21 145 HANNA, MARK 692.74 4,849.18 100.00 300.00 649.80 1,442.54 162 HASKINS, IRENE 386.10 2,702.70 100.00 300.00 649.80 1 ,135.90 169 HELDER. TIM 5.187.10 36,309.70 100.00 300.00 649.80 750.00 250.00 4,936.91) 180 HOYT, RICK 6,628.13 1,100.00 410.00 5,118.13 146 HUTCHENS, BERNICE 901 .10 6,307.70 100.00 300.00 649.80 130.00 1 ,520.90 143 JOHNSON, CHARLES 2,181.68 15,271 .76 100.00 300.00 649.80 42.67 2,888.81 103 JOHNSON, WENDELL 695.82 4,870.74 100.00 300.00 649.80 1 ,445.62 118 JONES, BOB 2,932.41 20,526.87 100.00 300.00 649.80 0.00 3,682.21 144 KILGORE. DONALD 1 ,818.27 12,727.89 100.00 300.00 649.80 19.72 2,548.35 129 LAWSON, FORREST 1 ,393.05 9,751.35 100.00 300.00 649.80 350.00 1,792.85 650 LITTLE, PATSY R 360.50 2,523.50 100.00 300.00 649.80 1,110.30 3 LORCH, DONNA G 360.50 2,523.50 100.00 300.00 649.80 1 ,110.30 - • 156 MARTIN, KENNETH 3,281.05 22,967.35 100.00 300.00 649.80 500.00 140.00 3,390.85 128 MCCAWLEY, LARRY 1 ,505.80 10,540.60 100.00 300.00 649.80 180.00 40.00 2,035.60 116 MCCHRISTIAN, MARIE 360.50 2,523.50 100.00 300.00 649.80 1 ,110.30 126 MCWHORTER, KAREN . 499.57 3,496.99 100.00 300.00 649.80 1 ,249.37 136 MITCHELL, MICHAEL 2,048.22 14,337.54 100.00 300.00 649.80 150.00 2,648.02 LL 141 MUEER, ROSEMARY 1,833.79 12,836.53 100.00 300.00 649.80 2,583.59 158 MUNSON,ANGELA 3,730.00 26,110.00 100.00 300.00 649.80 500.00 183.00 3,796.80 112 MURPHY, JAKE 360.50 2,523.50 100.00 300.00 649.80 0.00 1,110.30 137 PERDUE, LARRY 2,063.66 14,445.62 100.00 1300.00 649.80 200.00 25.00 2,588.46 164 PERSHALL, ROBIN 1,355.00 9,485.00 - 190.00 67.00 1,098.00 . 132 PHILLIPS, HOMER GENE 1 ,558.80 10,911.60 100.00 300.00 648.80 300.00 2,008.60 105 PRESTON, GEORGE DAVID 1 ,422.81 9,959.67 100.00 300.00 649.80 100.00 100.00 1 .972.61 135 RICKMAN. LOREN 1,982.28 13,875.96 100.00 300.00 649.80 230.00 65.00 2,437.08 104 RIGGINS, RAYMOND C 1,483.21 10,382.47 100.00 300.00 649.80 125.00 25.00 2,083.01 159 SCHUSTER,JOHN H. 2,769.74 19,388.18 100.00 300.00 649.80 340.00 - 110.00 3,069.54 122 SKELTON, FRANK (DECEASEDY 2,940.32 200.00 000 178 SKELTON, FRIEDA T. 367.54 1 ,102.62 100.00 100.00 649.80 1,117.34 168 STANLEY, MELVIN 4,335.87 30,351.09 100.00 300.00 - 649.80 1,100.00 300.00 3,685.67 155 STOUT, BETTY 427.71 2,993.97 100.00 300.00 649.80 0.00 1 ,177.51 133 SURLES, JERRY 2,417.93 16,925.51 100.00 300.00 649.80 450.00 150.00 2,567.73 142 TAYLOR, DENNIS 1 ,933.79 12,836.53 100.00 300.00 649.80 105.00 40.00 2,438.59 106 UPTON, FRANKLIN 939.20 6,574.40 100.00 300.00 649.80 10.00 1,679.00 163 WATSON, RICHARD 7,015.33 49,107.31 100.00 300.00 649.80 1 ,950.00 400.00 5,415.13 149 WILLIAMS, JOYCE 1 ,253.58 8,775.06 100.00 300.00 649.80 217.07 1,786.31 134 WITT, DON 1 ,569.81 10,988.67 100.00 300.00 649.00 115.00 64.00 2,140.61 127 WOOD, PAUL J 1,404.63 9,832.41 100.00 300.00 649.80 0.00 2,154.43 105,596.32 694,247.49 5,100.00 15,300.00 33,139.80 13,694.60 3,780.60 126,360.92 '6200Cealtt bane6is pBN M Mey 6900.9800 68009900 5335-00 5335-05 TMeI Year to Date 694,447.49 15,300.00 709,747.49 POLICE PENSION FUND September 2004 6800-9890 6800-9890 5395-00 5375-05 Future EMP# NAME GROSS YTD Wages Suppl. YTD Suppl. Suppl. Fed Tax ST. TAX NET 154 ALLEN, CHARLES 2,296.42 18,371.36 50.00 400.00 649.80 220.00 66.89 2,059.53 152 ARNOLD, WILLADEAN 863.14 6,905.12 50.00 400,00 649.80 913.14 130 BAYLES, DON 1 ,410.39 11 ,283.12 50.00 400.00 649.80 1,460.39 107 BLACK JOE P 1,000.12 8,000.96 50.00 400.00 549.80 100.00 20.00 930.12 120 BOWEN, J R (DECEASED)" 4,929.12 400.00 649.80 0.00 147 BRADLEY, GERALD 4,282.59 34,260.72 50.00 400.00 649.80 940.53 217.32 3,174.74 139 BRADLEY, RANDALL 2,541 .22 20,329.76 50.00 400.00 649.80 382.00 100.00 2,10922 167 BROWN, JOHN 3,875.58 31,004.64 50.00 400.00 649.80 600.00 200.00 3,125.58 157 CARROLL,RONALD L 1 ,871 .19 14,969.52 50.00 400.00 649.80 250.00 105.00 1 ,566.19 151 COLE, RUSTON 2,723.87 21 ,790.96 50.00 400.00 649.80 600.00 200.00 1 ,973.87 109 COOPER, ADRIAN 567.23 4,537.84 50.00 400.00 649.80 617.23 108 DENNIS. WARREN 1 ,223.34 9,786.72 50.00 400.00 649.80 0.00 1 ,273.34 160 DUGGER,GARY 2,810.94 22,487.52 50.00 400.00 649.80 300.00 120.00 2,440.94 125 FLOWERS, HAROLD 766.42 6,131 .36 50.00 400.00 649.80 816.42 140 FOSTER, BILLIE D. 2,849.68 22,797.44 50.00 400.00 649.80 300.00 120.00 2,479.68 148 FRIEND, JERRY 2,801.12 22,408.96 50.00 400.00 649.80 725.00 150.00 1,976.12 161 HANNA, JANICE 1 ,739.21 13,913.68 175.00 50.00 1 ,514.21 145 HANNA, MARK 692.74 5,541 .92 50.00 400.00 649.80 742.74 162 HASKINS, IRENE 386.10 3,088.80 50.00 400.00 649.80 436.10 169 HELDER, TIM 5,187.10 41,496.80 50.00 400.00 649.80 750.00 250.00 4,237.10 180 HOYT, RICK 6,628.13 6,628.13 50.00 1 ,100.00 410.00 5,168.13 146 HUTCHENS, BERNICE 901 .10 7,208.80 50.00 400.00 649.80 130.00 821 .10 143 JOHNSON, CHARLES 2,181 .68 17,453.44 50.00 400.00 649.80 42.67 2,189.01 103 JOHNSON, WENDELL 695.82 5,566.56 50.00 400.00 649.80 745.82 118 JONES, BOB 2,932.41 23,459.28 50.00 400.00 649.80 0.00 2,982.41 144 KILGORE, DONALD 1,818.27 14,546.16 50.00 400.00 649.80 19.72 1 ,848.55 129 LAWSON, FORREST 1 ,393.05 11 ,144.40 50.00 400.00 649.80 350.00 1 ,093.05 150 LITTLE, PATSY R 360.50 2,884.00 50.00 400.00 649.80 410.50 153 LORCH, DONNA G 360.50 2,884.00 50.00 400.00 649.80 410.50 156 MARTIN, KENNETH 3,281 .05 26,248.40 50.00 400.00 649.80 500.00 140.00 2,691 .05 128 MCCAWLEY, LARRY 1 ,505.80 12,046.40 50.00 400.00 669.80 180.00 40.00 1 ,335.80 116 MCCHRISTIAN, MARIE 360.50 2,884.00 50.00 400.00 649.80 410.50 126 MCWHORTER, KAREN 499.57 3,996.56 50.00 400.00 649.80 549.57 136 MITCHELL, MICHAEL 2,048.22 16,385.76 50.00 400.00 649.80 150.00 1 ,948.22 141 MUELLER, ROSEMARY 1,833.79 14,670.32 50.00 400.00 649.80 1,883.79 158 MUNSONANGELA 3,730.00 29,840.00 50.00 400.00 649.80 500.00 183.00 3,097.00 112 MURPHY, JAKE 360.50 2,884.00 50.00 400.00 649.80 0.00 410.50 137 PERDUE, LARRY 2,063.66 16,509.28 50.00 400.00 649.80 200.00 25.00 1 ,888.66 164 PERSHALL, ROBIN 1,355.00 10,840.00 190.00 67.00 1,098.00 132 PHILLIPS, HOMER GENE 1,558.80 12,470.40 50.00 400.00 649.80 300.00 1,308.80 105 PRESTON, GEORGE DAVID 1 ,422.81 11 ,382.48 50.00 400.00 649.60 100.00 100.00 1 ,272.81 135 RICKMAN, LOREN 1 ,982.28 15,858.24 50.00 400.00 649.80 230.00 65.00 1 ,737.28 104 RIGGINS, RAYMOND C 1 ,483.21 11 ,865.68 50.00 400.00 649.80 125.00 25.00 1 ,383.21 559 SCHUSTER,JOHN H. 2,769.74 22,157.92 50.00 400.00 649.80 340.00 110.00 2,369.74 122 SKELTON, FRANK (DECEASED)' 2,940.32 200.00 0.00 178 SKELTON, FRIEDA T. 367.54 1 ,470.16 50.00 200.00 649.80 417.54 168 STANLEY, MELVIN 4,335.87 34,686.96 50.00 400.00 649.80 1,100.00 300.00 2,985.87 155 STOUT, BETTY 427.71 3,421 .68 50.OD 400.00 649.60 0.00 477.71 133 SURLES, JERRY 2,417.93 19,343.44 50.00 400.00 649.80 450.00 150.00 1,867.93 142 TAYLOR, DENNIS 1,833.79 14,670.32 50.00 400.00 649.80 105.00 40.00 1,738.79 106 UPTON. FRANKLIN 939.20 7,513.60 50.00 400.00 649.80 10.00 979.20 163 WATSON, RICHARD 7,015.33 56,122.64 50.00 400.00 649.80 1 ,950.00 400.00 4,715.33 149 WILLIAMS, JOYCE 1,253.58 10,028.64 50.00 400.00 649.80 217.07 1 ,086.51 134 WITT, DON 1 ,569.81 12,558.48 50.00 400.00 649.80 115.00 64.00 1 ,440.81 127 WOOD, PAUL J 1 ,406.63 11 ,237.04 50.00 400.00 649.80 0.00 1 ,454.63 104,980.18 799,843.81 2,550.00 20,400.00 33,139.80 13,684.60 3,780.60 90,064.98 • 5800-0900 6e00-9800 6600-9800 533500 5335-05 53354M TOW W00 deampeaefils pal0ln May Year to Date 800,443.81 20,400.00 33,139.80 853,983.61 " wo deam bemft pap in Au" ts90.aoertaw.msdeembam che& POLICE PENSION FUND October 2004 6800.9800 6900.9800 5335-00 533505 Future EMP# NAME GROSS YTD Wages Suppl. YTD Suppl. Suppl. Fed Tax ST. TAX NET ALLEN, CHARLES 2,296.42 20,667.78 50.00 450.00 649.80 220.00 66.89 2,059.53 ARNOLD. WILLADEAN 863.14 7,768.26 50.00 450.00 649.80 913.14 130 BAYLES, DON 1,410.39 12,693.51 50.00 450.00 649.80 1 ,460.39 107 BLACK, JOE P 1,000.12 9.001.08 50.00 450.00 649.80 100.00 20.00 . 930.12 120 BOWEN, J R (DECEASED)" 4,929.12 400.00 649.80 0.00 147 BRADLEY, GERALD 4,282.59 38,543.31 50.00 450.00 649.80 940.53 217.32 3,174.74 - 139 BRADLEY, RANDALL 2,54122 22,870.98 50.00 450.00 649.80 382.00 100.00 2,109.22 167 BROWN, JOHN 3,875.58 34,880.22 50.00 450.00 649.80 600.00 200.00 3,125.58 157 CARROLL.RONALD L 1 ,871 .19 16,840.71 50.00 450.00 649.80 250.00 105.00 1 ,566.19 151 COLE, RUSTON 2,723.87 24,514.83 50.00 450.00 649.80 600.00 200.00 1 ,973.87 109 COOPER, ADRIAN 567.23 5,105.07 50.00 450.00 649.80 617.23 108 DENNIS, WARREN 1,223.34 11 ,010.06 50.00 450.00 649.80 0.00 1,273.34 160 DUGGER,GARY 2,810.94 25,298.46 50.00 450.00 649.80 300.00 120.00 2,440.94 125 FLOWERS, HAROLD 766.42 6,897.78 50.00 450.00 649.80 816.42 140 FOSTER, BILLIE D. 2,849.68 25,647.12 50.00 450.00 649.80 300.00 120.00 2,479.68 148 FRIEND, JERRY 2,801.12 25,210.08 50.00 460.00 649.80 725.00 150.00 1,976.12 161 HANNA, JANICE 1 ,739.21 15,652.89 175.00 50.00 1 ,514.21 145 HANNA, MARK 692.74 6,234.66 50.00 450.00 649.80 742.74 162 HASKINS, IRENE 386.10 3,474.90 50.00 450.00 649.80 436.10 169 HELDER, TIM 5,187.10 46,683.90 50.00 450.00 649.80 750.00 250.00 4,237.10 180 HOYT, RICK 6,628.13 13,256.26 50.00 50.00 1 ,100.00 410.00 5,168.13 146 HUTCHENS, BERNICE 901.10 8,109.90 50.00 450.00 649.80 130.00 821.10 143 JOHNSON, CHARLES 2.181.68 19,635.12 50.00 450.00 649.80 42.67 2,189.01 103 JOHNSON, WENDELL 695.82 6,262.38 50.00 450.00 649.80 745.82 118 JONES, BOB 2,932.41 26,391 .69 50.00 450.00 649.80 0.00 2,982.41 144 KILGORE, DONALD 1 ,818.27 16,364.43 50.00 450.00 649.80 19.72 1,848.55 129 LAWSON, FORREST 1 ,393.05 12,537.45 50.00 450.00 649.80 350.00 1,093.05 oLITTLE, PATSY R 360.50 3,244.50 50.00 450.00 649.80 410.50 LORCH, DONNA G 360.50 3,244.50 50.00 450.00 649.80 410.50 MARTIN; KENNETH 3,281 .05 29,529.45 50.00 450.00 849.80 500.00 140.00 2,691.05 128 MCCAWLEY, LARRY 1 ,505.80 13,552.20 50.00 450.00 649.80 180.00 40.00 1 ,335.80 116 MCCHRISTIAN, MARIE 360.50 3,244.50 50.00 450.00 649.80 410.50 126 MCWHORTER, KAREN 499.57 4,496.13 50.00 450.00 649.80 549.57 136 MITCHELL, MICHAEL 2,048.22 18,433.98 50.00 450.00 649.80 150.00 1,948.22 141 MUELLER, ROSEMARY 1 ,833.79 16,504.11 50.00 450.00 649.80 1 ,883.79 158 MUNSON,ANGELA 3,730.00 33,570.00 50.00 450.00 649.80 500.0D 183.00 3,097.00 112 MURPHY, JAKE 360.50 - 3,244.50 50.00 450.00 649.80 0.00 410.50 137 PERDUE, LARRY 2,063.66 18,572.94 50.00 450.00 649.80 200.00 25.00 1,888.66 164 PERSHALL, ROBIN 1 ,355.00 12,195.00 190.00 67.00 1 ,098.00 132 PHILLIPS, HOMER GENE 1,558.80 14,029.20 50.00 450.00 649.80 300.00 1 ,308.80 105 PRESTON, GEORGE DAVID 1 ,422.81 12,805.29 50.00 450.00 649.80 100.00 100.00 1,272.81 135 RICKMAN, LOREN 1,982.28 17,840.52 50.00 450.00 649.80 230.00 65.00 1 ,737.28 104 RIGGINS, RAYMOND C 1,483.21 13,348.89 50.00 450.00 649.80 125.00 25.00 1 ,383.21 159 SCHUSTER.JOHN H. 2,769.74 24,927.66 50.00 450.00 649.80 340.00 110.00 2,369.74 122 SKELTON, FRANK (DECEASED)' . 2,940.32 200.00 0.00 178 SKELTON, FRIEDA T. 367.54 1 ,837.70 50.00 250.00 649.80 - 417.54 168 STANLEY, MELVIN 4,335.87 39,022.83 50.00 450.00 649.80 1,100.00 3D0.00 2,985.87 155 STOUT, BEVY 427.71 3,849.39 50.00 450.00 649.80 0.00 477.71 133 SURLES, JERRY 2,417.93 21,761 .37 50.00 450.00 649.80 450.00 150.00 1 ,867.93 142 TAYLOR, DENNIS 1 ,833.79 16.504.11 50.00 450.00 649.80 105.00 40.00 1 ,738.79 106 UPTON, FRANKLIN 939.20 8,452.80 50.00 450.00 649.80 10.00 979.20 163 WATSON. RICHARD 7,015.33 63,137.97 50.00 450.00 649.80 1 ,950.00 400.00 4,715.33 149 WILLIAMS, JOYCE 1 .253.58 11 .28222 50.00 450.00 649.80 217.07 1 ,086.51 134 WITT, DON 1,569.81 14,128.29 50.00 450.00 649.80 115.00 64.00 1 ,440.81 127 WOOD, PAUL J 1,404.63 12,641.67 50.00 450.00 649.80 0.00 1 ,454.63 104,980.18 904,823.99 2,550.00 22,950.00 33,139.80 13,684.60 3,780.60 90,064.98 68004M 6800-9800 6800.9800 5335-00 5335-05 5335-06 TOW *$200 death benefits paid In May Year to Date 905,223.99 22,950.00 33,139.80 961 ,313.79 ^ s2oo deem benefits paw in Agmt ARKANSAS 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: wwwlopfi-prb.com FAYETTEVILLE Police Pension and Relief Fund From: David B. Clark RECEIVED Interim Executive Director Re: 2003 Actuarial Valuation CITY o, lETrEVILLE Date: June 10, 2004 O�T� CURK'S OFFICE 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 (see page 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? Osborn , Carreiro & Associates , Inc . One Union National Plaza,Suite 1690 124 West Capitol Avenue • ACTUARIES CONSULTANTS • ANALYSTS Little Rock, Arkansas 72201 (501 )376-8043 June 4, 2004 Board of Trustees Fayetteville Police Pension Fund Gentlemen : This report presents the results of our actuarial valuation of the assets and liabilities of the Fayetteville Police 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. 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. 1 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 s TABLE OF CONTENTS EXHIBIT 1 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 6-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. 2004 Necessary Annual Contribution to pay: 1 Normal Cost, plus $ 797766 2 Pay off the Unfunded Actuarial Accrued Liability 1 ,598,416 3 Total necessary $ 1 ,678,182 ' Less 4 Expected Employee Contribution 0 (6.00% of salary) Necessary Employer Contribution $ 126782182 (This is the amount needed in addition to investment income) Covered Payroll $ 219,008 Necessary Employer Rate 766.27% 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. The actual 2003 contribution was $817,538 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 nay I Regular Retirement Benefits $ 75 ,833 34.63% 2 Voluntary Termination Benefits 457 0.21 % 3 Survivors' Benefits 1 ,715 0.78% 4 Disability Benefits 19761 0.80% TOTAL $ 79,766 36.42% B Actuarial Accrued Liability 1 Active Lives Regular Retirement Benefits $ 2;5243156 • Voluntary Termination Benefits 0 Survivors' Benefits 0 Disability Benefits 0 TOTAL ACTIVE LIVES $ 2,5241156 2 Inactive Lives Retirees $ 117684,786 Disability Retirees 3,7031407 Widows & Children 684,626 TOTAL INACTIVE LIVES $ 165072,819 3 Total Liability $ 18,596,975 C Assets $ 11 ,125,006 D Unfunded Actuarial Accrued Liability $ 75471 ,969 5 s EXHIBIT 3 SUMMARY OF FINANCIAL INFORMATION (Items D-E, and G determined by Osborn, Carreiro and Associates, Inc.) Year Ended Year Ended Year Ended A. INCOME 12/31 /2001 12/31 /2002 12/31 /2003 I Employee Contributions $ 24,363 $ 21 , 142 $ 141287 2 Employer Contributions Employer/Court Fines%Other 178, 168 173,414 157,643 Insurance Tax 151 ,366 147,282 385,039 Local Millage 2272374 261 ,384 2749856 3 Other Income Guarantee Fund 0 0 0 LOPFI Subsidy 0 0 0 Police Supplement (Act 1452 of 1999) 20,415 29,800 30,500 Future Supplement (Act 1373 of 2003) 0 0 17,236 Other Income/Donations -45,920 11827 3,478 Adjustment to prior year 0 0 0 asset value - 4 Net Investment Income 441 ,400 - 111 ,908 36809 TOTAL INCOME $ 9979166 $ 522,941 $ 1 ,251 ,928 B. EXPENSES 1 Administrative $ 33032 $ 222364 $ 3, 121 2 Benefits Paid Monthly Benefits 9457121 1 ,010,277 1 ,141 ,685 Police Supplements 20,415 293750 30,500 Future Supplements 0 0 17,236 DROP Payouts 0 0 0 3 Refunds 00 0 TOTAL EXPENSES $ 9682568 $ 1 ,062,391 $ 1 ,192,542 • 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 71461 55220 27,996 3 Savings and Loan Deposits 0 0 0 4 Other Cash Equivalents 188,276 94,050 364,098 5 US Govt. Securities 4.3143961 5,341 ,421 4,370,229 6 Non-US Govt Securities 0 0 0 7 Mortgages 0 0 0 8 Corporate Bonds 1 ,812,057 934, 182 630,893 9 Common Stocks 4,202,728 3,615,591 4,689,678 10 Other 123,609 118,778 86,434 11 Pavables -15,075 -14,675 -159375 • TOTAL ASSETS $ 10,634,017 $ 10,094,567 $ 10,153,953 D. RATIO OF ASSETS TO ANNUAL EXPENSES: 11 .0 9.5 8.5 E. NET INVESTMENT RETURN: 4.2% -1 . 1 % 3.7% (Book Value Basis) 7 • • Exhibit 3 (Continued) 12/31 /1999 12/31/2000 12/31 /2001 12/31/2002 12/31/2003 F. TOTAL MARKET VALUE 1 . Market Value, end of year 11 ,665,225 11 ,412,261 10,7803521 10, 155,283 10,937,721 (Used for GASB calculations, page 9) 2. Market Value, beginning of year 11,374,032 112665,225 1134123261 10,7801521 1031552283 G. DEVELOPMENT OF ACTUARIAL VALUE OF ASSETS I . Actuarial Value of Assets, beginning of year 9,692, 117 10,572,573 11 ,137,375 115353,563 . 11 ,215,486 2. Non Investment Net Cash Flow -71302 -247,899 -412,802 -427,542 -309,503 3. Development of Investment Income (a) Total Market Investment Income (Fl -F2-G2) 298,495 -53065 -218,938 -19706 12091 ,941 (b) Amount for Immediate Recognition (6% G1 ) 581 ,527 634,354 668,242 681 ,214 672,929 (c) Amount for Phased In Recognition (a-b) -283,032 -6392419 -887,180 -8785910 419,012 (d) Phased In Recognition Current year : 20% of 3(c) -565606 -127,884 -177,436 -1755782 83,802 First Prior Year 1452960 -563606 -127,884 -1775436 -175,782 Second Prior Year 1769714 145,960 -56,606 - 127,884 -177,436 Third Prior Year 40,163 176,714 145,960 -563606 -1273884 Fourth Prior Year 40,163 176,714 1453960 -56,606 Total Phased In Recognition 306,231 178,347 -39,252 -391 ,748 453,906 (e) Actuarial Value Investment Income 8873758 812,701 16282990 2899465 2195023 ( 3(b) +. 3(d) ) 4. Actuarial Value of Assets, End of year ( 1 + 2 + 3(e) .) 105572,573 11 ,137,375 11 ,353,563 11 ,215,486 11 ,125,006 5. Net Investment Return on the 9.2% 7.8% 5.8% 2.6% 2.0% Actuarial Value of Assets Note: The Pension Review Board's Board Rule #11 first applies this methodology to determine the Actuarial Value of Assets for the 12/31/99 actuarial valuation report. Different methods were used to determine the Actuarial Value of Assets for the 12/31 /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) 2002 _ 2003 _ 2004 1 . Actuarially Required Contribution 1 ,092,437 ] ,092 ;437 1 ,718,246 2. Interest on NPO - 153 ,789 - 104,721 -75,667 3. Adjustment to ( 1 ) -461 ,224 -314,067 -2695779 4 . Annual Pension Cost ( 1 )+(2)-(3) 1 ,399,872 1 ,301 ,783 11912,358 5 . Actual Contribution Made 582,080_ _ 817,538 6. Increase in NPO (4)-(5) 817,792 4845245 7. NPO Beginning of Year -2,563, 150 -1 ,7457358 - 1 ,261 , 112 8. NPO End of Year - 1 ,745,358 - 1 ,261 , 112 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 7, 187,710 8, 177,365 989,655 87 .9% 518,643 190. 8% 12/31 /1997 9,970,550 8,870,503 - 1 , 100,047 112.4% 491 ,422 -223.8% 12/31 /1999 11 ,665,225 15,3615180 3,695,955 75.9% 482,457 766. 1 % 12/31 /2001 101780,521 15,902,803 55122,282 67.8% 3843312 1332.8% 12/31 /2003 I03937,721 185596,975 7,659,254 58.8% 219,008 3497.3% Note: 12/31 / 1995 are at amortized cost value. 9 • f 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 * 48 7755875 30.8% 2393145 1 ,968196 115645043 23 .5% 55.7% 12/31/1984 38 691 ,245 32.9% 227,671 2,637,566 . 1685,881 23.7% 61 .0% 12/31/1986 29 604,566 35.5% 214342 352515235 1 ,712,937 23.9% 65.5% 12/31/1987 * 28 666,941 37.8% 252,114 33374250 2,065775 24.6% 62.0% 12/31 /1989 25 6345711 38.8% 246132 40095866 2, 175,493 27.2% 64.8% 12/31 /1991 24 675,900 35.9% 242,541 57144,950 1 ,632,194 28.2% 75.9% 12/3.1 /1993 17 536,070 37.2% 199,314 62293,999 1 ;232,923 27.8% 83.6% 12/31/1995 * 15 518643 37 .5% 194517 7,187,710 989,655 27.7% 87.9% 12/31 /1997 12 4915422 15. 1 % 74142 9,126,449 -255946 26.9% 102.9% 12/31 /1999 * 11 482,457 175.7% 847,558 101572,573 4,788,608 45.2% 68.8% 12/31/2001 7 384,312 252.4% 969,851 1133535564 4,549,239 41 .6% 71 .4% 12/31/2003 * 3 219,008 766.3% 12678182 11 ,125,006 7,471 ,969 36.4% 59.8% * Benefits or assumptions changed Note: Normal cost prior to 12/31/89 is net of 0% employee contributions. 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 : 1 ) 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 and Employer Valuation Date Contributions Inactives Financed Assets ( 1 ) (2) (3) 12/31 /1982 141 ,635 1 ,538,508 1 ,8525096 1 ,968, 196 100% 100% 16% 12/31 /1984 186,492 2,220,660 1 ,916,295 2,6379566 100% 100% 12% 12/31 /1986 200,487 27982,120 1 ,7815565 3,251 ,235 100% 100% 4% 12/31 /1987 229,457 3,095,232 251I5,336 3,374,250 100% 100% 2% 12/31 /1989 266,726 3,719388 29199,245 4,0099866 100% 100% 1 % 12/31/1991 336,940 3,674,180 21766,024 5, 1441950 100% 100% 41 % 12/31 /1993 299,612 4,8341716 2,392,594 61293,999 100% 100% 48% 12/31 /1995 319,728 5,358,162 2,499,475 71187,710 100% 100% 60% 12/31 /1997 317,594 5,944,842 2081067 9, 126,449 100% 100% 110% 12/31 /1999 347,267 10,047,770 4,966, 144 10,572,573 100% 100% 4% 12/31 /2001 291 ,291 113488,981 41122,531 11 ,353,564 100% 96% 0% 12/31 /2003 155,251 16,0729819 2,368,905 11 , 125,006 100% 68% 0% ] 1 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 'art 25-29 Count 0 0 0 0 0 0 0 Salary 0 0 0 0 0 0 0 i0 30-34 Count 0 0 0 0 0 0 0 ' ; Salary 0 0 0 0 0 0 0 35-39 Count 0 0 0 0 0 0 0 Salary 0 0 0 0 0 0 0 fl 40-44 Count 0 0 0 0 1 0 0 •' , - Salary 0 0 0 0 591,782 0 4549 Count 0 0 0 0 0 0 0 Salary 0 0 0 0 0 0 0 50-54 Count 0 0 0 0 0 1 0 ` • _ '� ' Salary 0 0 0 0 0 81 ,342 0 2 55-59 Count 0 0 0 0 0 0 1 r , Salary 0 0 0 0 0 0 77,883 9 60-64 Count 0 0 0 0 0 0 0 ' Salary 0 0 0 0 0 0 0 t,, 65 & Count 0 0 0 0 0 0 0 Over Salary 0 0 0 0 0 0 0 Unknown Count 0 0 . 0 0 0 0 0 fl Age Salary 0 0 0 0 0 0 0 Total Count 1: -01 Salary 0 10 , , . , 04 g_ a mal i12 EXHIBIT6 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 3-4 4-5 5-10 Over Total Under Count 0 0 0 0 1 0 0 40 Benefit 0 0 0 10 15,786 0 0 1'57786 , 40-44 Count 0 1 0 0 0 0 0 1 Benefit 0 45, 152 0 .0 0 0 0 _ 45;132 ; 45-49 i Count 0 1 0 1 1 2 2 7 Benefit 0 60.432 0 320269 211800 52,918 _28,334 ;]95;753 50-54 Count 0 0 0 .0 1 1 1 3 . Benefit 0 0 0 0 435456 499894 2_1 ,365 1UJI5 55-59 Count 0 1 0 1 0 2 3 . . 7 Benefit 0 503515 0 32,749 0 70,860 79,067 ., 23_3;191 60-64 Count 0 0 0 0 0 1 12 : - - . 3 Benefit 0 0 0 0 0 26,754 198,234 224988: 65-69 Count 0 0 -10 0 0 6 ' Benefit 0 0 81 ,732 0 0 0 101 ,775 70-74 Count 0 0 0 0 0 0 6 Benefit 0 0 0 0 0 0 855301 75-79 Count 0 0 0 0 0 0 3 Benefit 0 0 0 0 0 0 16,361 "'�-'46 3'6V 80-84 Count 0 0 0 0 0 0 4 : 4 Benefit 0 0 0 0 0 0 33,991 3MO1. 85 & Count 0 0 0 0 0 0 1 `"'*r'` ;.":1• Over Benefit 0 0 0 0 0 0 8,564 : ' '. '8;564 Unknown Count 0 0 0 0 0 0 0 - 0 Age Benefit 0 0 0 0 0 0 0 0 Total ` Count !#w� �; rat z 3 : 4a 53 Benefit i0g 15;099 m 81,77 -31J,41 ;65 01S 81;02 200,42b 572;992 r 1,157 3q9 This includes 30 retirees with annual benefit of $800,486 . This includes 14 disableds with annual benefit of $293,763 . This includes 9 survivors with annual benefit of $63,060 . 13 • EXHIBIT 7 PRINCIPLE PROVISIONS OF THE PLAN EMPLOYEE Member of Police Department EMPLOYER Fayetteville Police Department MEMBERSHIP Condition of Employment. Police officers 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. Refundable if member terminates before retirement eligibility. Employer 1 . Matching contribution equal to employee contribution 2. State Insurance Premium Tax turnback 3 . Local Millage 4. 10% of all fines & forfeitures collected by the Police Department. FINAL SALARY Highest salary for any continuous twelve-month period of time worked prior to retirement. RETIREMENT BENEFITS Eligibility 20 Years of Service regardless of age. Benefit 90% of Final Salary, but not less than $4,200. If service exceeds 20 years, the annual benefit is increased by $240 for each year over 20, up to $ 1 ,200/ year extra. 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. DEATH BENEFITS Eligibilily Death of an active member or member receiving benefits. Benefit 1 . Widow receives same amount as member is receiving or eligible to receive, excluding the 1 .25% additional formula for service over 25 years. 2. Each child under age 18 (23 if still in school) receives $ 1 ,500/year. If no surviving spouse, children receive spouse's benefit to age 18. 3 . If no widow or children, widowed mother receives $1 ,500/year. • 14