94-328 Resolution No. 94-328
RESOLUTION
ACCEPTING AND PLACING ON FILE THE POLICE PENSION FUND
ACTUARIAL VALUATION REPORT
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN,
ILLINOIS, that it hereby accepts and places on file the Police
Pension Fund Actuarial Valuation Report as of December 31,
1993 prepared by Actuarial Associates, Ltd.
s/ George VanDeVoorde
George VanDeVoorde, Mayor
Presented: December 14, 1994
Adopted: December 14, 1994
Omnibus Vote: Yeas 7 Nays 0
Attest:
s/ Dolonna Mecum
Dolonna Mecum, City Clerk
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{rw CITY OF ELGIN
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Police Pension Fund
Actuarial Valuation as of 12/31/93
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CITY OF ELGIN
Police Pension Fund
Actuarial Valuation as of 12/31/93
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FOREWORD
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Actuarial Associates, Ltd. was retained to perform an independent study of the
Police Pension Fund.
The study developed a level of contributions which would meet the requirements
of State statutes and fund the plans on an actuarially sound basis.
The contribution required from the City increased from $109,325 or 2.2% of
salary to $118,599 or 2.2% of salary.
ACTUARIAL ASSOCIATES, LTD.
Charles W. McKenzie, A.S.A. , M.A.A.A.
Consultant
Actuarial Associates, Ltd.
1315 Elmwood Avenue
Wilmette IL 60091
(708) 256-0479
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Elgin Police Valuation 1
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CITY OF ELGIN
Police Pension Fund
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Actuarial Valuation as of 12/31/93
r CONTENTS
SECTION PAGE NO.
ix
FOREWORD 1
Pli I REPORT SUMMARY AND ACTUARY'S CERTIFICATION 2
II GENERAL DISCUSSION 4
L' A. Experience During 1993 4
B. Legislated Changes 5
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C. Change in Contribution 6
7 D. History of Experience 7
III RESULTS OF VALUATION 9
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A. Normal Cost and Accrued Liability 9
7 B. Determination of Minimum Annual Contribution 10
C. Projection of Benefit Payments 11
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D. Census and Financial Data 12
Pi E. Summary of Principal Plan Provisions 16
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IV ACTUARIAL ASSUMPTIONS AND METHODS 20
A. Actuarial Assumptions Used in Valuation 20
B. Illustration of Assumptions Used in
Valuation for Member Hired at Age 28 21
C. Service Table 22
D. Actuarial Method 23
E: V Discussion of Actuarial Assumption 24
VI GASB Statement 5 Calculation 26
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Section I
Report Summary and Actuary's Certification
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Section I
!" Report Summary and Actuary's Certification
Pm This section of the report compares the results of the December 31, 1993 and
1992 valuations:
December 31. 1992 December 31, 1993
1. Contribution $ 109,325 (2.2%) $ 118,599 (2.2%)
2. Normal Cost at
PP Valuation Date $ 404,318 $ 454,057
3. Unfunded Accrued Liability
at Valuation Date $ 1,364,689 $ 2,871,275
4. Assets on Valuation Date $23,777,671 $25,476,625
rm 5. Number of Participants
a) Active 122 125
b) Inactive 60 63
182 188
6. Annual Salaries of
Active Participants $ 4,900,296 $ 5,348,385
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Elgin Police Valuation 2
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Actuary's Certification
The results shown in this report are based upon:
1. Employee census data submitted by the City;
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4. 2. Financial data submitted by the City;
3. Actuarial assumptions which I believe are reasonable and adequate;
4. Generally accepted actuarial methods.
r I certify that the results so obtained are accurate and correct to the best of
my knowledge.
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ACTUARIAL ASSOCIATES, LTD.
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Charles W. McKenzie, A.S.A. , M.A.A.A.
FP Enrolled Actuary No. 93-2416
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Elgin Police Valuation 3
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Section II
General Discussion
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it Section II
r General Discussion
This section of the report discusses the experience of the fund during the year
Fi ended December 31, 1993, and explains the change in contribution.
A. Census Data
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L During the year, the following changes occurred in the group of active
police officers:
r Active
Officers Salaries
r 1. Included in 12/31/92 valuation 122 $4,900,296
2. Retirements
-1 -53,736
3. Disabled 0 0
r 4. Vested terminations -80,880
5. Non vested terminations 0 0
6. Officers active all year 119 $4,765,680
E. 7. Salary increases to officers
active all year 396,657 (+8.3%)
8. New members 6 186,048
P 9. Included in 12/31/93 valuation 125 $5,348,385
Gains and losses regarding salary increases are measured against the salaries of
rm officers who are active throughout the year. In 1993, there were 119 such
officers, who received average annual increases of 8.3%. The valuation assumes
5.5% increase per annum, so that Item 7 above was expected to be $262,112.
L Salary increases have risen considerably since 1990, even though the average
increase during the last eight years has been 6.3%
LIP Salary increases equal to the assumed rate increase the normal cost by the
assumed rate. However, increases greater than the assumed rate have a greater
effect on the annual contribution. This is so because unexpected increases also
PP affect the accrued liability, since a salary increase affects a member's entire
working life.
r In a later paragraph of this Section, we show that the expected 5.5% salary
L increases raised the Normal Cost by about $23,500. But the additional 2.8% of
unexpected increases raised the contribution by about $48,000.
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Elgin Police Valuation 4
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A historysalary of increases is as follows:
r Fiscal year Approximate
Ending December 31 Annual Increase
1986 4.4%
ri 1987 5.0
i= 1988 5.0
1989 5.6
P"' 1990 5.6
1991 8.5
1992 8.4
Po 1993 8.3
L. 1986-1993 6.3
Poi B. Financial Data
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During the fiscal year ended December 31, 1993, the assets of the Plan
realized a return of approximately 8.9%. A history of investment return is
as follows:
rm Fiscal year Approximate
if Ending December 31 Annual Yield
1984 12.02
1985 11.8
1986 11.4
1987 11.0
r 1988 10.9
1989 10.7
1990 10.2
1991 10.2
L. 1992 9.3
1993 8.9
FP 1984-1992 10.6
The investment return during 1993 was in excess of the 8.5% assumption,
P" resulting in an actuarial gain which reduced the required contribution by
6. about $9,400.
P" As can be seen on page 9, investment gains and losses are directly reflected
as (decreases)/increases, respectively, in the unfunded accrued liability,
and funded over the remaining amortization period.
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Elgin Police Valuation 5
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C. Benefit Change
'o Effective July 1, 1993, the annual 3% cost-of-living increase to retired
officers will be compounded. Prior to that date, the annual increase was 3%
of the pension the officer received when he first retired. This change
increased the annual contribution by about $134,800, or 2.5% of payroll .
D. Funding Change
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Also effective July 1, 1993, the period over which unfunded accrued
liabilities are amortized may be changed. The remaining period under prior
PP law is about 26 years. Now, that period may be extended to 40 years.
In addition, the amortization may be as a level percent of future payroll ,
PI rather than a level dollar amount.
As shown later in this report, utilizing the new amortization period and
method would reduce the required contribution by about $130,000.
E. Contributions Greater Than Required
r The report on the valuation as of December 31, 1992 showed a contribution
requirement for 1993 in the amount of $569,096. On an accrual basis,
contributions during 1993 amounted to $594,832. The excess contributions
reduced the 1994 requirement by about $2,500.
F. Inactive Experience
The liability for members receiving pensions or eligible to receive pensions
in the future was $19,900 lower than expected as of December 31 , 1993. This
P" experience gain resulted in a decrease of about $1,900 in the contribution
required for 1994.
G. New Hires
Six new officers were hired prior to the end of 1994. These new hires
r increased the required contribution by about $17,400.
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Elgin Police Valuation 6
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H. Reconciliation of Costs
1. Gross contribution for 1993 $569,100
2. Increases due to
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a. Expected salary increases 23,500
b. Salary increases greater than expected 48,000
c. New hires 17,400
d. Benefit change 134.800
223,700
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3. Decreases due to
a. Investment return greater than expected -9,400
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b. Contributions greater than required -2,500
c. Experience gains -30,500
d. Funding change -130.000
-172,400
4. Gross contribution for 1994 $620,400
I . History of Valuation Results
The following table summarizes the results of the last five actuarial
valuations. Two columns of figures are shown for 1993, one prior to
reflecting the 1993 benefit and funding changes, and one that takes those
changes into account.
As can be seen, the Normal Cost has stayed at the same level as a percent of
payroll . The annual gross contribution has remained essentially the same
for the last four years. Thus the assumptions selected in 1989 seem to be
appropriate for the fund.
The 1989 valuation showed the Plan to be 91.1% funded on an on-going plan
basis. This figure rose to 94.4% in 1993, but dropped to 89.9% after the
benefit changes were taken into consideration.
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HISTORY OF VALUATION RESULTS
1989 1990 1991 1992 1993 1993
(Prior to (After
Legislative Legislative
Changes) Changes)
Participants:
Active 103 111 112 122 125 125
Inactive 57 57 59 60 63 63
160 168 171 182 188 188
Total salaries 3,628,200 4,004,256 4,335,624 4,900,296 5,348,385 5,348,385
Average salaries 35,225 36,074 38,711 40,166 42,787 42,787
Average age 38.4 38.4 38.2 37.1 37.4 37.4
Average service 12.5 12.0 12.2 11.2 11.3 11.3
Normal Cost:
Amount 299,401 334,288 356,185 404,318 442,543 454,057
Percent of Pay 8.25% 8.35% 8.22% 8.25% 8.27% 8.49%
Accrued Liability 19,614,731 20,857,503 23,199,704 25,142,360 26,985,335 28,347,900
Assets 17,874,229 19,888,081 21,785,769 23,777,671 25,476,625 25,476,625
Unfunded Accrued Liability 1,740,502 969,422 1,413,935 1,364,689 1,508,710 2,871,275
Gross Contribution:
Amount 486,805 453,640 520,274 569,096 615,581 620,412
Percent of Pay 13.4% 11.3% 12.0% 11.6% 11.5% 11.6%
City Contribution:
Amount 146,389 77,941 113,484 109,325 113,768 118,599
Percent of Pay 4.0% 1.9% 2.6% 2.2% 2. 1% 2.2%
Investment Return:
Actual 10.7% 10.2% 10.2% 9.3% 8.9% 8.9%
Assumed 8.5% 8.5% 8.5% 8.5% 8.5% 8.5%
Salary Increases:
Actual 5.6% 5.6% 8.5% 8.4% 8.3% 8.3%
Assumed 5.5% 5.5% 5.5% 5.5% 5.5% 5.5%
Elgin Police Valuation 8
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III
Valuation Results
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Results of Valuation
(Entry Age Normal Cost Method)
Normal Accrued
Cost Liability
" (as of December 31, 1993)
1. Active Police Officers
Retirement Pension $305,966 $13,820,803
Disability Pension $ 14,893 $ 167,600
Death Pension (survivors) $ 51,534 $ 490,105
Withdrawal Pension $ 81.664 $ 803,137
Total Active $454,057 $15,281,645
2. Retired Police Officers and
Beneficiaries
Service Retirees 0 $10,607,155
Widows 0 $ 883,829
Disabled Retirees 0 $ 1,079,451
Deferred Vested 0 $ 495,820
ti Total Inactive 0 $13,066,255
3. Total --active and inactive $454,057 $28,347,900
4. Assets as of 12/31/93 $25,476,625
[114 5. Unfunded accrued liability
12/31/93 (3-4) $ 2,871,275
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Elgin Police Valuation 9
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L Determination of Minimum Annual Contribution
ri New Benefits New Benefits
Old Funding New Funding
L. 1. Normal Cost due 1/1/94 $454,057 $454,057
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amortize unfunded accrued
liability $237,536 $117,751
L 3. Interest at 8.5% for a year on
Items 1 and 2 58,785 48.604
r 4. Total contribution required from
all sources for fiscal 1994
(1 + 2 + 3) $750,378 $620,412
(14.0% of (11.6% of
salary) salary)
r 5. Contributions expected from
active police officers (9% of salary) $481 ,355 $481.355
r 6. Interest expected on contributions
from active police officers 20.458 20.458
r 7. Net contributions required from
City (4 - 5 - 6) $248,565 $118,599
(4.6% of (2.2% of
rsalary) salary)
Notes: (1) Item 2 in Column 1 uses an amortization period of 26 years, with a
level dollar payment each year.
(2) Item 2 in Column 2 uses a 40-year period, and amortization as an
level percent of future payroll .
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Projection of Benefit Payments
Year Ended Benefits Expected Actual
December 31 to be Paid Payments
1990 $ 746,100 $708,624
Po 1991 $ 829,800 $794,074
1992 $ 900,000 $888,408
1993 $1,041,400 $954,422
■. 1994 $1,128,400
1995 $1,343,200
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1996 $1,460,900
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1997 $1,618,100
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1998 $1,791,600
The following assumptions were made:
1. Mortality according to the UP-1984 table for spouses currently receiving
Pi benefits, otherwise no mortality.
2. Active members assumed to retire as soon as they reach age 53 and complete
P" 20 years of service.
3. Benefits, except those to surviving spouses and the disabled, assumed to
increase each year by 3% of the prior year's benefit if age is 55 or over.
Disabled pensioners receive increases equal to 3% of the initial benefit
awarded if age 60 or over.
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4. Refunds of contributions upon termination are not included in the
calculations.
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Distribution of Membership by Age, Service
and Average Annual Base Pay
PP as of December 31, 1993
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Years of Service
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PP Average
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Age 0-4 5-9 10-14 15-19 20-24 25-29 30+ Total Pay
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20-24 5 5 $34.841
25-29 21 5 26 $37,391
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30-34 14 10 1 25 $39,846
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35-39 3 3 9 3 18 $45,461
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40-44 1 4 9 3 17 $45,243
F. 45-49 2 8 9 2 21 $46,775
- 50-54 1 1 6 1 9 $49,051
P 55-59 3 3 $50.684
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60-64 1 1 $42,660
r Total 43 19 16 21 13 9 4 125
Average
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Pay $36,708 $43,201 $45,551 $45,645 $47.633 $49,752 $48,678 $42,787
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Average Service: 11.3
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14 Elgin Police Valuation 12
Census of Inactive Members
Service Retirees Disabled Retirees Widows Deferred
Attained Aged it Mo. Bfts. it Mo. Bfts. # Mo. Bfts. ft Mo. Bfts.
35-39
40-44 1 $ 998.50
45-49 2 $3,593.50 5 $8,997.61
50-54 6 $13,021.36 1 $1,144.50 1 $ 506.17
55-59 7 $17,372.34 1 $1,547.65
60-64 7 $14,068.04 2 $1 ,778. 17
65-69 8 $13,740.34 1 $ 974.08
70-74 4 $ 3,588.80 5 $3,164.65
75-79 2 $ 906.31 3 $1,291.25
80-84 2 $ 946.09 2 $ 848.42
85 & Over 3 $1,571.08
Total 36 $63,643.28 5 $7,284. 15 17 $10,133.82 5 $8,997.61
Elgin Police Valuation 13
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Investment Experience
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FISCAL YEAR ENDED
1989 1990 1991 ! 1992 1993
1. Beginning Assets $16,011,298 - $17,8784,229 $19,888,081 $21,785,769 $23,777,671
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2. Contributions
a) Property Taxes 462,392 519,761 302,662 202.102 251,476
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b) Replacement Taxes 43,102 48,761 27,555 18,544 $ 22,965
UI c) Salary Deductions 316,564 349,93 389,329 445,155 469,739
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d) Net Accruals 62,725 -218,824 -99,934 48,826 -149,348
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e) TOTAL $ 884,783 $ 699,291 $ 619,612 $ 714.627 $ 594,832
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3. Benefits Paid 652,079 708,624 794,074 888,408 954,422
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4. Separation Benefits 10,337 31,232 41,639 50,326 0
5. Expenses Paid 31,178 23,421 4,844 10,132 42,660
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6. Net Accruals 51,967 -236,472 -100,000 -199,954 -31
Wm 7, (3)+(4)+(5)+(6) $ 745,291 $ 526,805 $ 740,557 $ 748,912 $ 997,051
8. Ending Assets $17,874,229 $19,888,081 $21,785,769 $23,777,671 $25,476,625
AA 9. Investment Income 1,723,439 1,841,366 2,018,633 2,026.187 2.101,173
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10. Average Fund $16,081,044 $17,960,472 $19,827,609 $21,768,627 $23,576,562
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11. Average Yield 10.72% 10.25% 10.18% 9.31% 8.91%
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04 Yield 1989-1993 = 9.87%
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Notes: (10) = (1) + 1/2 (2e) - 1/2 (7)
UI (11) = (9) / (10)
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City of Elgin Police Pension Fund
PYE 12-31-90 PYE 12-31-91 PYE 12-31-92 PYE 12-31-93
Number of Number of Number of Number of
Employees Salaries Employees Salaries Employees Salaries Employees
Salaries
Beginning of year 103 $3,628,200 111 $4,004,256 112 $4,335,624 122 $4,900,296
Terminations:
Retirement -1 $ -41,988 -2 $ -83,148 -2 $ -107,080 -1 $ -53,736
Disabled -1 $ -38,328
Vested -1 $ -35,016 -1 $ -36,420 -1 $ -49,068 -2 $ -80,880
Non-Vested -1 $ -35,016 -2 $ -52,920 -2 $ -74,592
Total -3 $ -112,020 -5 $ 172,488 -6 $ -269,068 -3 $ -134,616
Number active
all year 100 $3,516,180 106 $3,831,768 106 $4,066,556 119 $4,765,680
Salary increases to
those active all year -- $ 197,016 -- $ 326,232 -- $ 341,956 -- $ 396,657
5.6% 8.5% 8.4% 8.3%
New members +11 $ 291 ,060 +6 $ 177,624 +16 $ +491,784 6 $ 186,048
End of year 111 $4,004,256 112 $4,335,624 122 $4,900,296 125 $5,348,385
Elgin Police Valuation 15
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Summary of
Police Pension Fund Benefits for Illinois Municipalities 500,000 and Under
Member - Any member of the police force except those
1. employed as part-time police officers, special police officers, night
watchmen, temporary employees, traffic guards or auxiliary police,
clerks or civilian employees.
} 2. who fail to make the required contributions.
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3. who elect to participate in the Illinois Municipal Retirement Fund.
Creditable Service - Time as a member of the police force excluding furloughs
without pay in excess of 30 days, but including leaves of absence for illness or
accident and periods of disability for which no disability payments were
received. Military service counted if member pays required contributions, but
only to a maximum of 5 years, unless prior to 7/1/73.
Also included is time served as an executive of a police officers' organization,
if the officer had previously served at least 10 years and receives no credit for
the same period of time from another plan. The officer must make the required
contributions from his salary, and the organization must make any other
contributions required to pay for his benefits earned during the period.
Normal Retirement Pension - On or after age 50 and completion of 20 years of
Creditable service. A monthly benefit equal to:
!� 1. 50% of annual salary for the rank held for 1 year prior to retirement;
plus
2. 2% of such salary for each year of service in excess of 20 to a maximum
of 10; plus
3. 1% of such salary for each year of service in excess of 30. The maximum
percentage of salary is 75% and no monthly benefit will be less than
$400.
Officers retiring on and after July 1, 1987 shall have their pension based on the
larger of:
i ) the salary attached to the rank held by the officer for one year
immediately prior to retirement;or
ii ) the salary attached to the rank held on the last day of service.
Mandatory Retirement Pension - After completion of 8 years (but less than 20) of
Creditable Service, a monthly benefit of 214% of salary for the rank held for 1
year prior to retirement for each year of Creditable Service. For officers
retiring July 1, 1987 and later, salary attached to the rank held on the last day
of service shall be used, if larger.
Elgin Police Valuation 16
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- Non-Mandatory Retirement Pension - After completion of 8, but less than 20 years
of Creditable Service, a monthly pension commencing at age 60 equal to 2'4 percent
!"" of annual salary for the rank held for 1 year prior to retirement. For officers
L. terminating after July 1 1987, salary attached to the rank held on the last day
of service shall be used, if larger. If the officer receives a refund of his
ii contributions, he forfeits his right to a pension at age 60.
Return to Employment - If a retired member returns to employment and again
retires, his pension shall be increased if he had returned to work for at least
:: 5 years and made the required contributions. If disabled, payments must have
been received for more than 2 years.
Pension Type Retirement Date Pension Increases
a. Non disabled with before 7/2/71 3% increase in January following
20+ years attainment of age 65 or in January,
1972, if then over 65, for each year
!" of retirement. 3% increase each
. following January.
(I. b. Non-disabled 7/2/71 -12/31/85 A. If 60 or older at retirement, 3%
increase on 1st of month following
1st anniversary of retirement, and
3% increase each January thereafter.
B. Else, 3% increase on 1st of month
following age 60 (if it follows the
1: 1st anniversary of retirement) and
3% increase each January thereafter.
c. Non-disabled After 1/1/86 A. If 55 or older at retirement, 3%
r increase on 1st of month following
anniversary of retirement for each
full year of retirement, and 3% in-
crease each January thereafter.
B. Else, 3% increase on 1st of month
following attainment of age 55 (if
r it follows 1st anniversary of
retirement) for each full year of
retirement, and 3% increase each
January thereafter.
r d. Non-disabled 1/1/77 12/31/85 3% increase for each full year of
and received no retirement on latest of:
r increase under i ) 1st day of month following 1st
(b) before anniversary of retirement
7/1/87 ii ) 1st day of month following
attainment of age 55;
1: iii ) July 1, 1987.
3% increase in each January there-
after.
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Pension Type Retirement Date Pension Increases (cont'd)
e. Disability 3% increase in January following age
oi" 60 for each year of retirement. 3%
it increase each following January.
Note: Effective July 1 , 1993, increases to all but disabled members and spouses
PP will be compounded.
Rights on Death - Upon the death of a retired member or a member (whether active
1* or not) with at least 20 years of Creditable Service, his pension shall be paid
to the surviving widow, or to dependent children (because of age or because of
physical or mental disability regardless of age) , or to surviving dependent
Piparents. Minimum pension is $400.
Disability In Line of Duty - A life annuity of 65% of salary for rank at date of
suspension of duty or retirement. If returns to duty after receiving pension for
±� 2 years, must remain active for 5 years before being eligible for higher disabil -
ity
isabil -
ity pension. Minimum pension is $400.
Disability Not On Duty - A life annuity of 50% of salary for rank at date of
suspension of duty or retirement. If returns to duty after receiving pension for
2 years, must remain active for 5 years before being eligible for higher
disability pension. Minimum pension is $400.
Disability Pension Option - May be elected by a member over age 50 if receiving
disability pension, and years of service plus years on pension equal 20.
F1Election guarantees 50% benefit for life.
Death in Line of Duty - A life annuity of 50% of salary for the rank held for one
year prior to death to widow, or children under 18, or dependent parents.
Minimum pension is $400.
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Death In Service - Same as Death in Line of Duty, but must have served 10 years.
Minimum pension is $400.
Effect of Marriage - If the member marries after retirement, benefits not payable
after death. Benefits to surviving spouse not payable after remarriage. Bene-
y fits to children not payable after marriage.
Refunds of Contributions - At death, prior to completion of 10 years of service,
contributions returned without interest to widow. If the member leaves no widow,
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regardless of length of service, excess of contributions (without interest) over
benefits paid, prior to the members death, will be distributed to the heirs or
estate.
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If member separates from service prior to completion of 20 years of service, con-
tributions refunded upon request. Acceptance of a refund cancels any later
rights to a pension.
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Note: Benefits for disabled members and survivors may be decreased by amounts
received under Workers' Compensation Act and Workers' Occupational Disease Act.
• See Sec. 3-114.5
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Elgin Police Valuation 18
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Member Contributions -
!"' 7/01/09 - 7/22/43 1% of salary (maximum $1.00/month until 7/01/21,
then $2.00/month until 7/01/27)
PP 7/23/43 - 7/19/49 3% of salary
7/20/49 - 7/16/59 5% of salary
"' 7/17/59 - 6/30/71 7% of salary
7/01/71 - 6/30/75 7-1/2% of salary
PIP
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7/01/75 - 12/31/86 8-1/2% of salary
1/01/87 - 9% of salary
Salary is the annual salary including longevity for rank held, excluding overtime
pay, holiday pay, bonus pay and merit pay or any other cash benefit over and
r, above legislated salary.
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Reserve - Unfunded accrued liabilities to be funded over a period of no less than
40 years commencing January 1, 1980.
rs
Effective July 1, 1993, unfunded accrued liabilities may be funded over 40 years
as a level percent of payroll .
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Elgin Police Valuation 19
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Section IV
Actuarial Assumptions and Method
Pa
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Actuarial Assumptions Used in Valuation
Mortality Rate For active members -- UP-1984 Mortality Table Set
forward 1 year.
111 For former members other than disabled pensioners -
. - UP-1984 Mortality Table; set forward 1 year for
males, set back 4 years for females.
For disability pensioners -- Disability Annuity
Mortality Table as published by the Railroad
Retirement Board.
wo
Interest 8.5% per annum net of expenses.
4w Withdrawal Special table which varies by age.
Retirement for Age A table of retirement percentages accounting for
the tendency toward early retirement as follows:
Pi
Percentage of Active Group
Age Assumed to Retire
PP
50 40%
51 30
52 20
r" 53 15
54 10
55 25
Pe 56 20
57 15
58 15
59 10
60 10
L. 61 15
62 20
63 25
64 30
65 100
ri Salary Index 5.5% increase per annum.
Expenses and Contingencies No loading has been included.
Assets Valued at amortized cost.
Disability Special table.
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Elgin Police Valuation 20
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Illustration of Assumptions Used in Valuation for Member
Hired at Age 28
(Percentage of Remaining Active Members)
Mortality Rate Withdrawal Disability Retirement
Acme Prior to Retirement Rate* Rate Rate
r 28 0.11% 12.52 0.03
29 0.11 12.0 0.03
30 0.11 11.5 0.03
r 31 0.12 11.0 0.03
32 0.12 10.6 0.04
33 0.13 10.1 0.04
34 0.14 8.7 0.04
1: 35 0.15 9.2 0.04
36 0.16 8.7 0.04
37 0. 18 8.3 0.04
r 38 0. 19 7.8 0.04
39 0.21 7.4 0.05
40 0.23 6.9 0.05
41 0.26 6.4 0.06
r 42 0.28 6.0 0.06
43 0.31 5.5 0.06
44 0.34 5.1 0.07
45 0.38 4.6 0.08
46 0.42 4. 1 0.08
47 0.46 3.7 0.09
48 0.51 3.2 0.10
r 49 0.56 2.8 0.12
50 0.62 2.3 0.13 40.00%
51 0.69 0.14 30.00
1: 52 0.75 0.16 20.00
53 0.83 0.18 15.00
54 0.90 0.21 10.00
55 0.99 0.24 25.00
r 56 1.08 0.29 20.00
57 1.19 0.34 15.00
58 1.30 0.40 15.00
[I. 59 1.42 0.47 10.00
60 1.55 0.60 10.00
61 1.70 0.77 15.00
62 1.87 0.96 20.00
r 63 2.05 1.19 25.00
64 2.26 1.44 30.00
65 100.00
1:
* No withdrawals assumed after age 47.
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l: Elgin Police Valuation 21
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PII
FPService Table
Illustrating effect of mortality, withdrawal , disability
and retirement assumptions for age 28 at employment
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i.
Number of Members Number of Members
Acme. Remaining in Service Ate Remaining in Service
r
L. 28 1,000 53 51
29 874 54 43
P 30 768 55 38
L. 31 678 56 28
32 602 57 22
33 538 58 18
P. 34 482 59 15
35 440 60 14
36 398 61 12
FP 37 363 62 10
L 38 332 63 8
39 305 64 5
40 282 65 4
41 262
42 244
43 229
44 215
45 203
46 193
47 184
r 48 176
49 170
50 164
51 93
52 64
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rElgin Police Valuation 22
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Actuarial Method
Entry Age Normal Cost Method
This method determines a normal cost which is the level percentage of
earnings which should be contributed each year, starting in the first
year of employment, in order to pay for the promised benefits.
The accrued liability is the present value of all the normal costs which
should have been paid up to the valuation date.
The unfunded accrued liability is the difference between the accrued
liability and the assets in the fund. To the extent there is a differ-
ence, it is paid off over a set period of years just as a conventional
r"' mortgage is paid off.
Gains and losses arise because experience varies from the assumed. Such
gains and losses are reflected in the accrued liability.
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Elgin Police Valuation 23
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Section V
Discussion of Actuarial Assumptions
F
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PP
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Discussion of Actuarial Assumptions
L
The actuarial assumptions upon which this report is based were selected in 1989.
As discussed earlier in this report, the assumptions, in the aggregate, seem to
be appropriate, since the annual contribution has been relatively stable.
Looking at some of the assumptions individually, the rate of investment return
has exceeded the 8.5% assumption throughout the last ten years, yet has been
dropping steadily. At the moment, no change in this assumption is warranted.
Salary increases have been at or below the assumed 5.5% until the last 3 years,
when they rose considerably. Again, no change is contemplated.
Retirements are being delayed longer than expected. About 10% of the active
ri
group could retire immediately.
Withdrawals are occurring at a slower rate than expected.
The following summarizes the reasons for the changes in contribution over the
last four years.
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Elgin Police Valuation 24
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FISCAL YEAR ENDED DECEMBER 31
i 1989 1990 1991 1992 1993 1989-1993
PP 1. Gross contribu-
tion for year $486,800 $453,600 $520,300 $569,100 $486,800
2. Changes due to
M
a. Investment return
less (greater)
than assumed (29,500) (31,500) (16,800) (9,400) (87,200)
P
b. Expected salary
increases 17.300 19,100 19,900 23.500 79,800
PP c. Salary increases
(less) greater
than assumed 1,300 43,800 42,200 48,000 135,300
PP d. Actual contribu-
tions less
(greater) than
required (19,900) (15,700) (18,600) (2,500) (56.700)
e. Experience (gain)
loss (29.600) 34,500 (21.800) (30,500) (47,400)
$ f. New Hires 27,200 16,500 43,900 17,400 105,000
g. Benefit Changes -- -- -- 134,800 134,800
h. Funding Changes -- -- -- (130,000) (130,000)
PP
i. Total Changes = (33,200) 66,700 48,800 51,300 133,600
3. Gross contribu
PP tion for next
fiscal year $486,800 $453.600 $520,300 $569,100 $620,400 $620,400
P
PP
PP
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Elgin Police Valuation 25
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OP
OP
10
P' Section VI
GASB Statement 5 Pension Disclosures
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MUNICIPALITY: City of Elgin AS OF: December 31, 1993
GASB STATEMENT 5 PENSION DISCLOSURES
POL. PEN.
a. Plan Descriptions
00 Annual Covered Payroll
(Calendar/Fiscal Year) $5,348,385
op
Employee/Beneficiary Membership
Retirees and Beneficiaries
Currently receiving benefits
and terminated employees
_ entitled to benefits but
not yet receiving them 63
L, Current Employees
Vested 65
pi Nonvested 60
L,
TOTAL 188
PP
L.
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Elgin Police Valuation 26
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PP
WP
y MUNICIPALITY: City of Elgin AS OF: December 31, 1993
P•
GASB STATEMENT 5 PENSION DISCLOSURES
b. Funding Status and Progress
Actuarial Information -
Copies of actuarial valuations
performed by private actuary,
•• public actuary, or both, which
provide required disclosure
detail below:
11" Pension Benefit Obligation
Standardized Disclosure Measure Yes? X
Credited Projected Benefits Method No?
6 Substitute Disclosure Measure Yes?
g"
Entry Age Normal Method No?
• December 31,
Actuarial Valuation Date 1993
Significant Actuarial Assumptions
a) Rate of return on investment 8.5%
of present and future asset compounded
Plo annually
b) Projected salary increases 5.5%
compounded
annually
c) Post-retirement benefit increases 3.0%
compounded
annually
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FP Elgin Police Valuation 27
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0 MUNICIPALITY: City of Elgin AS OF: December 31, 1993
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GASB STATEMENT 5 PENSION DISCLOSURES
IA
POL. PEN.
Pi
c. Funding Status and Progress (cont. )
PP Pension Benefit Obligation (Prior to
Retirees and beneficiaries (After legis- legislative
currently receiving benefits lative changes changes)
and terminated employees not
yet receiving benefits $13,066,255 $12,206,035
Current employees
Accumulated employee
contributions $3,541,320 $3,541,320
Employer- Financed Vested $9,093,980 $8,699,125
Employer- Financed Non-Vested $(203,859) $(214,592)
ri Total Pension Benefit Obligation $25,497,696 $24,231,888
Net assets available for benefits $25,476,625 $25,476,625
Unfunded (assets in excess of
pension benefit obligation) $21,071 $(1,244,737)
Effects on the pension benefit
4 obligation of current year changes
Current-year changes in the actuarial
assumptions, benefit provisions, and
ri
methodology resulted in an increase
(decrease) in the pension benefit
obligation as compared to the amount
PP of the PBO calculated irrespective of
such changes, of $1,265,808
Note: The left-hand column takes into account the benefit change effective July 1,
1993; the right-hand column does not.
lis
110 Elgin Police Valuation 28
ow
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MUNICIPALITY: City of Elgin AS OF: December 31, 1993
r
GASB STATEMENT 5 PENSION DISCLOSURES
POLICE PEN.
r
d. Actuarially determined contribution
requirements and contribution made
(cont. )
Effects on the contribution requirements
of current-year changes
Current-year changes in the actuarial
assumptions, actuarial funding method,
1: benefit provisions, and methodology
resulted in an increase (decrease)
in the contribution requirement (CR)
as compared to the amount of the
contribution requirement calculated
irrespective of such changes, of $ 4,800
1: e. Actuarially determined contribution
requirement - Employer $94,176
Normal Cost
Amortization of Unfunded Actuarial $24,423
Accrued Liability
" TOTAL $118,599
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Elgin Police Valuation 29
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r. MUNICIPALITY: City of Elgin AS OF: December 31, 1993
GASB STATEMENT 5 PENSION DISCLOSURES
Police
Year Pension
f. Trend Information
Net assets available for benefits 1990 107.4%
as a % of the pension benefit 1991 105.7%
obligation (PBO) 1992 104.9
1993 99.9%
r Unfunded (assets in excess of)
PBO as a % of annual covered
payroll (expressing the unfunded
1: pension benefit obligation as a
percentage of annual covered 1990 (34.4)%
payroll approximately adjusts for 1991 (27.0)%
the effects of inflation for 1992 (22.6)%
analysis purposes) 1993 0.4 %
r Employer contributions as a 1990 14.2
of annual covered payroll 1991 7.6%
1992 4.5%
1993 5. 1%
r
Required 1990 $ 77,941
1991 $113,484
1992 $109,325
1993 $118,599
Made 1990 $568,522
1991 $330,217
1992 $220,646
1993 $274,441
rNote: "Year" means the Fiscal Year ending in the calendar year.
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Elgin Police Valuation 30
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MUNICIPALITY: City of Elgin AS OF: December 31, 1993
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I
POLICE PENSION FUND
REQUIRED SUPPLEMENTARY INFORMATION
ANALYSIS OF FUNDING PROGRESS
(4) (6)
Unfunded Unfunded pension
' (1) (2) (3) pension (5) benefit obligation
Net assets Pension Percentage benefit Annual as a percentage
F available benefit Funded obligation covered of covered payroll
for benefits obligation (1)/(2) (2)-(1) payroll (4)/(5)
1984
r
1985
1986
1987
1988
1989 $17,874,229 $16,998,493 105.2 $ (875,736) $3,628,204 (24.1)
rP
1990 $19,888,081 $18,511,989 107.4 $(1,376,092) $4,004,256 (34.4)
1991 $21,785,769 $20,617,052 105.7 $(1,168,717) $4,335,624 (27.0)
r
1992 $23,777,671 $22,669,021 104.9 $(1,108,650) $4,900,296 (22.6)
[P- 1993 $25,476,625 $25,497,696 99.9 $ 21,071 $5,348,385 0.4
Pi
it.
PP
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L_ Elgin Police Valuation 31
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MUNICIPALITY: City of Elgin AS OF: December 31, 1993
FP
I
r POLICE PENSION FUND
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!IP REQUIRED SUPPLEMENTARY INFORMATION
REVENUES BY SOURCE AND EXPENSES BY TYPE
rRevenues by Source
Iii
L Fiscal Employee Employer Investment
Year Contributions Contributions Income Totals
[II
1985 $ 247,296 $ 323,793 $ 1,154,108 $ 1,725,197
1986 $ 262,952 $ 357,898 $ 1,271,828 $ 1,892,677
r 1987 $ 287,580 $ 423,747 $ 1,391,843 $ 2,103,170
I. 1988 $ 315,878 $ 509,017 $ 1,560,135 $ 2,385,030
1989 $ 316,564 $ 505,494 $ 1,723,439 $ 2,545,497
1990 $ 349,593 $ 568,522 $ 1,841,366 $ 2,759,481
1991 $ 389,329 $ 330,217 $ 2,018,633 $ 2,738,179
1992 $ 445,155 $ 220,646 $ 2,026,187 $ 2,691,988
1993 $ 469,739 $ 274,441 $ 2,101,173 $ 2,845,353
r
Expenses by Type
ri Fiscal Administrative
Year Benefits Expenses Refunds Totals
1985 $ 334,930 $ 838 $ 0 $ 335,768
1986 $ 377,893 $ 2,956 $ 0 $ 380,849
1987 $ 410,066 $ 4,093 $ 14,900 $ 429,059
r 1988 $ 526,158 $ 29,974 $ 21,292 $ 517,424
1989 $ 652,079 $ 47,650 $ 10,337 $ 710,066
1990 $ 708,624 $ 6,949 $ 31,232 $ 746,805
rs 1991 $ 794.074 $ 4,844 $ 41,639 $ 840,557
1992 $ 888,408 $ 10,132 $ 50,326 $ 948,866
1993 $ 954,422 $ 42,660 $ 0 $ 997,082
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Elgin Police Valuation 32
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Police Pension Fund
Projection of Required Contributions
Funding Accomplished by the Year 2033
Fiscal Year Ending December 31
1994 1995 1996 1997 1998
1. Annual base salaries of members $5,348,385 $5,471,803 $5,735,341 $6,006,625 $6,236,658
2. Normal cost as a percent of salaries 8.49% 8.49% 8.49% 8.49% 8.49%
3. Normal cost 454,057 464,556 486,930 509,962 529,492
4. Payment to amortize UAL 117,751 120.468 126,270 132,242 137,307
5. Interest to end of year on (3) and (4) 48,604 49,727 52,122 54,587 56,678
6. Gross contribution = (3 + 4 + 5) $620,412 $634,751 $665.322 $696,791 $723,477
7. Expected member contributions with
interest to year end 501,813 513,392 538,118 563.572 585,154
8. Net contribution due from City $118,599 $121,359 $127,204 $133,219 $138,323
9. Contribution as a percent of annual
base salaries 2.2% 2.2% 2.2% 2.2% 2.2%
Notes: (1) Salaries were assumed to increase at 5.5% per year;
(2) Men were assumed to retire at mid-year of the year in which they attained age 53 and completed 20 years of
service;
(3) No new hires were assumed except to replace those assumed to retire.
Elgin Police Valuation 33
` ! rrli Frmii r71 r71 Irmil ir-si r—ii r''' 1 r.. 1 r I I !: 1 ,. i M !
Police Pension Fund
Salary Projection
Fiscal Year Ended December 31
1994 1995 1996 1997 1998
1. Salaries at beginning
of year $5,348,385 $5,471,803 $5,735,341 $6,006,625 $6,236,658
2. Expected salary
increases 294,161 300,949 315,444 330,364 343.016
3. Expected retirements (465,164) (106,437) (116,982) (253,983) (169,508)
4. Replacement hires 294.421 69,026 72,822 153,652 121,578
5. Salaries at end of
year $5,471,803 $5,735,341 $6,006,625 $6,236,658 $6,531,744
Elgin Police Valuation 34