95-266 Resolution No. 95-266
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,
1994 prepared by Actuarial Associates, Ltd.
s/ Kevin Kelly
Kevin Kelly, Mayor
Presented: December 20, 1995
Adopted: December 20, 1995
Omnibus Vote: Yeas 7 Nays 0
Attest:
s/ Dolonna Mecum
Dolonna Mecum, City Clerk
E161
Agenda Item No.
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November 15, 1995
TO: Mayor and Members of the City Council
FROM: Richard B. Heiwig, City Manager
SUBJECT: Police and Fire Pension Actuarial Reports
PURPOSE
The purpose of this memorandum is to approve the actuarial
valuation reports of the Police and Fire Pension Funds as of
December 31, 1994 .
BACKGROUND
r The State Statutes allow a municipality to retain an actuary
to perform an independent and more in-depth study of the
police and fire pension funds.
Actuarial Associates, Ltd. , who have performed actuarial
valuations for the City for the past six years, completed the
independent study of the police and fire pension funds for the
year ending December 31, 1994 . The studies determined a level
of contributions that would meet the requirements of the State
Statutes and fund the plans on an actuarially sound basis.
The current actuarial reports recommend a 1996 funding level
of $127, 661 for the police pension and $550, 691 for the fire
pension. This information can be found on page 1 of the
actuarial reports.
Both pensions are in excellent financial condition as shown in
Section III beginning on page 9 of each report. The police .
pension is 90.0% funded while the fire pension is funded at
94. 4%. The actuarial recommendations will fully fund the
pensions as required by State Statutes.
In 1995, the City contributed $118, 600 and $527, 620 to the
police and fire pension funds respectively. The State'*/
actuaries, using very conservative actuarial assumptions
proposed funding the pension funds at $1, 234, 138 and
$1, 267, 311 for the. police and fire pension funds respectively.
Mayor and Members of the City Council
Police and Fire Pension Actuarial Reports
November 15, 1995
Page 2
The majority of the City' s contributions are derived from the
annual property tax levy. Therefore a savings of over $1.5
million in the property tax levy has been realized by hiring
the independent actuary to perform the studies. Similar type
savings have also been realized in previous years. The fee
for the past year's study was $4, 000.
COMMUNITY GROUPS/INTERESTED PERSONS CONTACTED
Copies of the actuarial report will be given to the police and
fire pension boards and reviewed at their board meetings.
FINANCIAL IMPACT
The City's contribution for 1996 will be funded through the
annual property tax levy.
LEGAL IMPACT
None.
RECOMMENDATION
It is recommended that the City Council formally accept the
police and fire pension actuarial reports for the period
ending December 31, 1994 and place them on file.
Respectfully submitted,
907U' 1 "' ;')I-4-40.'/CLL
'James R. Nowicki
Finance Director
1 +')L `1
Richard B. Helwig
City Manager
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JRN/daw
Attachment
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' CITY OF ELGIN
' Police Pension Fund
Actuarial Valuation as of 12/31 /94
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CITY OF ELGIN
Police Pension Fund
Actuarial Valuation as of 12/31 /94
CONTENTS
SECTION PAGE NO.
FOREWORD 1
I REPORT SUMMARY AND ACTUARY'S CERTIFICATION 2
II GENERAL DISCUSSION 4
A. Experience During 1994 4
B. Legislated Changes 5
C. Change in Contribution 6
1 D. History of Experience 7
III RESULTS OF VALUATION 9
A. Normal Cost and Accrued Liability 9
B. Determination of Minimum Annual Contribution . 10
C. Projection of Benefit Payments 11
D. Census and Financial Data 12
E. Summary of Principal Plan Provisions 16
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
V GASB STATEMENT 5 CALCULATIONS 24
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SECTION I
REPORT SUMMARY AND ACTUARY'S CERTIFICATION
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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 $118,599 or 2.2%
of salary to $127,661 or 2.4% of salary.
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ACTUARIAL ASSOCIATES, LTD.
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11 Charles W. McKenzie, A.S.A. , M.A.A.A.
Consultant
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Actuarial Associates, Ltd.
1315 Elmwood Avenue
Wilmette IL 60091
(708) 256-0479
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Elgin Police Valuation 1
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Section I
Report Summary and Actuary' s Certification
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This section of the report compares the results of the December 31 , 1993
and 1994 valuations:
December 31 , 1994 December 31 , 1993
1 . Contribution $ 127,661 (2.4%) $ 118,599 (2.2%)
11 2. Normal Cost at
Valuation Date $ 457,880 $ 454,057
3. Unfunded Accrued Liability
at Valuation Date $ 3,008, 167 $ 2,871 ,275
4. Assets on Valuation Date $27,025,728 $25,476,625
5. Number of Participants
a) Active 126 125
b) Inactive 64 63
190 188
6. Annual Salaries of
Active Participants $ 5,421 ,928 $ 5,348,385
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IElgin Police Valuation 2
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Actuary' s Certification
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The results shown in this report are based upon:
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1 . Employee census data submitted by the City;
2. Financial data submitted by the City;
1 3. Actuarial assumptions which I believe are reasonable and adequate;
4. Generally accepted actuarial methods.
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.
Enrolled Actuary No. 93-2416
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1 Elgin Police Valuation 3
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1 SECTION II
GENERAL DISCUSSION
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II Section II
General Discussion
I This section of the report discusses the experience of the fund during the
year ended December 31 , 1994, and explains the change in contribution .
IA. Census Data
During the year, the following changes occurred in the group of active
II police officers:
Active
Officers Salaries
II 1 . Included in 12/31 /93 valuation 125 $5,348,385
2. Retirements -2 -118,224
3. Disabled 0 0
4. Died -1 -52,968
5. Vested terminations 0 0
6. Non-vested terminations -3 -109,704
I 7. Officers active all year 119 $5,067,489
8. Salary increases to officers
active all year 137,383 (+2.7%)
9. New members 7 217,056
I10. Included in 12/31 /94 valuation 126 $5,421 ,928
Gains and losses due to salary increases are measured against the salaries of
I officers who are active throughout the year. In 1994, there were 119 such
officers, who received average annual increases of 2.7%. The valuation
assumes 5.5% increase per annum, so that Item 8 above was expected to be
I $278,712.
Salary increases have risen considerably since 1990, even though the average
Iincrease during the last nine years has been 5.9%
Salary increases equal to the assumed rate increase the normal cost by the
I assumed rate. However, increases greater than the assumed rate have a greater
effect on the annual contribution. This is so because unexpected increases
also affect the accrued liability, since a salary increase affects a member' s
Ientire working life.
In a later paragraph of this Section, we show that the expected 5.5% salary
II increases would have raised the Normal Cost by about $25,700. Since the
actual increases were less than expected, the contribution decreased by about
$31 ,900.
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1 Elgin Police Valuation 4
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A history of salary increases is as follows:
Fiscal year Approximate
Endinq December 31 Annual Increase
1986 4.4%
I 1987 5.0
1988 5.0
1989 5.6
I 1990 5.6
1991 8.5
1992 8.4
I 1993 8.3
1994 2.7
1986-1994 5.9%
1 B. Financial Data
During the fiscal year ended December 31 , 1994, the assets of the Plan
Irealized a return of approximately 8.2%. A history of investment return
is as follows:
I Fiscal year Approximate
Ending December 31 Annual Increase
1985 11 .8%
I 1986 11 .4
1987 11 .0
1988 10.9
I 1989 10.7
1990 10.2
1991 10.2
I 1992 9.3
1993 8.9
1994 8.2
I1985-1994 10.3%
The investment return during 1994 was less than the 8.5% assumption,
I resulting in an actuarial loss which increased the required contribution
by about $3,200.
I 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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IElgin Police Valuation 5
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C. Contributions Less Than Required
The report on the valuation as of December 31 , 1993 showed a contribution
requirement for 1994 in the amount of $620,412. On an accrual basis,
contributions during 1994 amounted to $619, 118. The shortfall increased
the 1995 requirement by about $100.
D. Inactive Experience
The liability for members receiving pensions or eligible to receive
pensions in the future was $21 ,300 higher than expected as of December 31 ,
1994. This experience loss resulted in an increase of about $1 ,000 in the
contribution required for 1995.
E. New Hires
Seven new officers were hired prior to the end of 1994. These new hires
increased the required contribution by about $19,300.
F. Reconciliation of Costs
1 . Gross contribution for 1994 $620,400
2. Increases due to
a. Expected salary increases 25,700
b. Investment return less than expected 3,200
c. New hires 19,300
Ed . Experience loss among inactives 1 ,000
e. Contribution less than required 100
49,300
3. Decreases due to
a. Salary increases less than expected -31 ,900
b. Experience gains among active participants -1 ,400
-33,300
4. Gross contribution for 1995 $636,400
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Elgin Police Valuation 6
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G. 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 as a percentage of payroll. 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
11 benefit changes were taken into consideration. In 1994 it was 90.0%.
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Elgin Police Valuation 7
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MN MN WM MN WM MN MN NM mm m mm mm mm mm mm mm m mom mon
HISTORY OF VALUATION RESULTS
1990 1991 1992 1993 1993 1994
Participants:
Active 111 112 122 125 125 126
Inactive 57 59 60 63 63 64
168 171 182 188 188 190
Total salaries 4,004,256 4,335,624 4,900,296 5,348,385 5,348,385 5,421 ,928
Average salaries 36,074 38,711 40, 166 42,787 42,787 43,031
Average age 38.4 38.2 37. 1 37.4 37.4 37.7
Average service 12.0 12.2 11 .2 11 .3 11 .3 11 .4
Normal Cost:
Amount 334,288 356, 185 404,318 442,543 454,057 457,880
Percent of Pay 8.35% 8.22% 8.25% 8.27% 8.49% 8.44%
Accrued Liability 20,857,503 23, 199,704 25, 142,360 26,985,335 28,347,900 30,033,895
Assets 19,888,081 21 ,785,769 23,777,671 25,476,625 25,476,625 27,025,728
Unfunded Accrued 969,422 1 ,413,935 1 ,364,689 1 ,508,710 2,871 ,275 3,008, 167
Liability
Gross Contribution:
Amount 453,640 520,274 569,096 615,581 620,412 636,374
Percent of Pay 11 .3% 12.0% 11 .6% 11 .5% 11 .6% 11 .7%
City Contribution:
Amount 77,941 113,484 109,325 113,768 118,599 127,661
Percent of Pay 1 .9% 2.6% 2.2% 2. 1% 2.2% 2.4%
Investment Return:
Actual 10.2% 10.2% 9.3% 8.9% 8.9% 8.2%
Assumed 8.5% 8.5% 8.5% 8.5% 8.5% 8.5%
Salary Increases :
Actual 5.6% 8.5% 8.4% 8.3% 8.3% 2.7%
Assumed 5.5% 5.5% 5.5% 5.5% 5.5% 5.5%
Elgin Police Valuation 8
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' SECTION III
VALUATION RESULTS
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11 Results of Valuation
II (Entry Age Normal Cost Method)
INormal Accrued
Cost Liability
I (as of December 31 , 1994)
1 . Active Police Officers
IRetirement Pension $306,987 $14, 184,800
IIDisability Pension $ 15,402 $ 161 , 169
Death Pension (survivors) $ 53,490 $ 480,319
1 Withdrawal Pension $ 82,001 $ 826,827
Total Active $457,880 $15,653, 115
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2. Retired Police Officers and
IIBeneficiaries
Service Retirees 0 $11 ,881 ,309
IWidows 0 $ 840,572
IDisabled Retirees 0 $ 1 , 123,804
Deferred Vested 0 $ 535,095
ITotal Inactive 0 $14,380,780
1 3. Total- -active and inactive $457,880 $30,033,895
4. Assets as of 12/31 /94 $27,025,728
II5. Unfunded accrued liability
12/31 /94 (3-4) $ 3,008, 167
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11 Elgin Police Valuation 9
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Determination of Minimum Annual Contribution
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1 . Normal Cost due 1 /1 /95 $457,880
2. Payment required 1 /1 /95 to
amortize unfunded accrued liability $128,640
3. Interest at 8.5% for a year on
Items 1 and 2 49,854
4. Total contribution required from
all sources for fiscal 1995
(1 + 2 + 3) $636,374
(11 .7% of
salary)
5. Contributions expected from
active police officers (9% of salary) $487,974
6. Interest expected on contributions
from active police officers 20,739
7. Net contributions required from
City (4 - 5 - 6) $127,661
(2.4% of
salary)
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Item 2 uses a 40-year period starting in 1994, and amortization as a
level percent of future payroll.
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Elgin Police Valuation 10
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11 Projection of Benefit Payments
Year Ended Benefits Expected Actual
December 31 to be Paid Payments
1990 $ 746, 100 $ 708,624
1991 $ 829,800 $ 794,074
1992 $ 900,000 $ 888,408
1993 $1 ,041 ,400 $ 954,422
1 1994 $1 , 128,400 $1 ,072,617
1995 $1 ,211 ,000
1996 $1 ,416,600
1997 $1 ,567,600
1998 $1 ,756,000
1 1999 $1 ,932,400
The following assumptions were made:
1 . Mortality according to the UP-1984 table for spouses currently
receiving benefits, otherwise no mortality.
2. Active members assumed to retire as soon as they reach age 53 and
complete 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.
4. Refunds of contributions upon termination are not included in the
calculations.
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Elgin Police Valuation 11
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III
Distribution of Membership by Age, Service
and Average Annual Base Pay
Ias of December 31 , 1994
Years of Service
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IAverage
Age 0-4 5-9 10-14 15-19 20-24 25-29 30+ Total Pay
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25-29 23 1 24 $37,656
1 30-34 16 16 _ 32 $39,795
35-39 3 5 9 5 22 $44,766
1 40-44 1 3 9 2 15 $46,078
I45-49 2 6 8 3 19 $46,706
50-54 1 2 8 1 12 $49,667
1 55-59 1 1 $42,660
60-64 1 1 $42,660
ITotal 42 23 14 21 12 12 2 126
Average
IPay $36,972 $42,958 $45,100 $47,093 $49,566 $48,382 $42,660 $43,031
IAverage Age: 37.7
Average Service: 11 .4
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IElgin Police Valuation 12
NMI MI 111111 NM INN ONNI NMI IIIMI INN NMI I NM MI MI 111111 IIIII WM M
Census of Inactive Members
Service Retirees Disabled Retirees Widows Deferred
Attained Aged # Mo. Bfts. # Mo. Bfts. # Mo. Bfts. # Mo. Bfts .
35-39
40-44
45-49 2 $3, 189.00 5 $8,997.61
50-54 6 $14,807.53 2 $3,418.79 1 $ 506.17
55-59 8 $21 , 154.06 1 $1 ,547.65
60-64 7 $14,024.73 1 $ 506.67
65-69 8 $15,294.32 2 $2,245.58
70-74 4 $ 4,285.93 4 $2,764.65
75-79 3 $ 1 ,582.97 4 $1 ,691 .21
80-84 2 $ 970.80 2 $ 848.42
85 & Over 2 $1 , 171 .08
Total 38 $72, 120.34 5 $8, 155.44 16 $ 9,733.76 5 $8,997.61
Elgin Police Valuation 13
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Investment Experience
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FISCAL YEAR ENDED
II1990 1991 1992 1993 1994
1 . Beginning Assets $17,878,229 $19,888,081 $21 ,785,769 $23,777,671 $25,476,625
II 2. Contributions
a) Property Taxes 519,761 302,662 202,102 251 ,476 102,894
IIb) Replacement Taxes 48,761 27,555 18,544 22,965 22,000
c) Salary Deductions 349,93 389,329 445,155 469,739 486,799
IId) Net Accruals -218,824 99,934 48,826 -149,348 7,425
IIe) TOTAL $ 699,291 $ 619,612 $ 714,627 $ 594,832 $ 619,118
3. Benefits Paid 708,624 794,074 888,408 954,422 1,072,617
II4. Separation 31 ,232 41,639 50,326 0 28,875
Benefits
II5. Expenses Paid 23,421 4,844 10,132 42,660 41,595
6. Net Accruals -236,472 -100,000 -199,954 -31 300
II7. (3)+(4)+(5)+(6) $ 526,805 $ 740,557 $ 748,912 $ 997,051 $ 1 ,143,387
8. Ending Assets $19,888,081 $21 ,785,769 $23,777,671 $25,476,625 $27,025,728
II9. Investment Income 1,841 ,366 2,018,633 2,026,187 2,101 ,173 2,073,372
10. Average Fund $17,960,472 $19,827,609 $21 ,768,627 $23,576,562 $25,214,490
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11 . Average Yield 10.25% 10.18% 9.31% 8.91% 8.22%
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Average Yield 1990-1994 = 9.38%
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I Notes: (10) = (1 ) + 1 /2 (2e) - 1 /2 (7)
(11 ) = (9) / (10)
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IElgin Police Valuation 14
IMO IMO M I IIII I I I O 11110 I I I I I I WI
City of Elgin Police Pension Fund
PYE 12-31-91 PYE 12-31-92 PYE 12-31-93 PYE 12-31-94
Number of Number of Number of Number of
Employees Salaries Employees Salaries Employees Salaries Employees Salaries
Beginning of year 111 $4,004,256 112 $4,335,624 122 $4,900,296 125 $5,348,385
Terminations:
Retirement -2 $ -83, 148 -2 $ -107,080 -1 $ -53,736 -2 -118,224
Disabled -1 $ -38,328
Died -1 -52,968
Vested -1 $ -36,420 -1 $ -49,068 -2 $ -80,880
Non-Vested -2 $ -52,920 -2 $ -74,592 -3 $ -109,704
Total -5 $ 172,488 -6 $ -269,068 -3 $ -134,616 -6 $ -280,896
Number active
all year 106 $3,831 ,768 106 $4,066,556 119 $4,765,680 119 $5,067,489
Salary increases to
those active all year -- $ 326,232 - - $ 341 ,956 -- $ 396,657 -- $ 137,383
8.5% 8.4% 8.3% 2.7%
New members +6 $ 177,624 +16 $ +491 ,784 6 $ 186,048 7 $ 217,056
End of year 112 $4,335,624 122 $4,900,296 125 $5,348,385 126 $5,421 ,928
Elgin Police Valuation 15
1 Summary of
Police Pension Fund Benefits for Illinois Municipalities 500,00 and Under
Member - Any member of the police force except those
1 1 . employed as part-time policemen, special policemen, night watchmen,
temporary employees, traffic guards or auxiliary police, clerks or
civilian employees.
1 2. who fail to make the required contributions.
Creditable Service - Time as a member of the police force excluding furl-
oughs 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 policemen' s 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
1 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 212% 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.
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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
2'2 percent of annual salary for the rank held for 1 year prior to retirement .
For officers 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 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.
1 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 1st
anniversary of retirement) and 3% increase
each January thereafter.
Ic. Non-disabled After 1 /1 /86 A. If 55 or older at retirement, 3% increase
on 1st of month following anniversary of
retirement for each full year of retirement,
and 3% increase each January thereafter.
B. Else, 3% increase on 1st of month follow-
ing attainment of age 55 (if it follows 1st
anniversary of retirement) for each full
year of retirement, and 3% increase each
January thereafter.
d. Non-disabled 1/1 /77 - 12/31 /85 3% increase for each full year of
and received no retirement on latest of:
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;
iii) July 1 , 1987.
3% increase in each January thereafter.
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Elgin Police Valuation 17
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Pension Type Retirement Date Pension Increases (cont'd)
II e. Disability 3% increase in January following age 60 for
each year of retirement. 3% increase each
following January.
Note: Effective July 1 , 1993, the annual 3% cost-of-living increase is
compounded, except to disabled pensioners.
Rights on Death - Upon the death of a retired member or a member (whether
active 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 parents . 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 pen-
sion for 2 years, must remain active for 5 years before being eligible for
higher disability 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 receiv-
ing disability pension, and years of service plus years on pension equal 20.
Election 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.
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. Benefits to children not payable after marriage.
Refunds of Contributions - At death, prior to completion of 10 years of ser-
i vice, contributions returned without interest to widow. If the member leaves
no widow, 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.
If member separates from service prior to completion of 20 years of service,
contributions refunded upon request. Acceptance of a refund cancels any later
rights to a pension.
Note: Benefits for disabled members and survivors may be decreased by amounts
11 received under Workers' Compensation Act and Workers' Occupational Disease
Act. See Sec. 3-114.5
Elgin Police Valuation 18
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Member Contributions -
111 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)
1 7/23/43 - 7/19/49 3% of salary
7/20/49 - 7/16/59 5% of salary
1 7/17/59 - 6/30/71 7% of salary
7/01 /71 - 6/30/75 712-% of salary
7/01 /75 - 12/31 /86 8 2% of salary
1 1 /01 /87 - 9% of salary
Salary is the annual salary including longevity for rank held, excluding over-
time pay, holiday pay, bonus pay and merit pay or any other cash benefit over
and above legislated salary.
Reserve - Unfunded accrued liabilities to be funded over a period of no less
than 40 years commencing January 1 , 1980.
Effective July 1 , 1993, a municipality may elect to fund its unfunded accrued
liabilities over 40 years from that date, as a level percent of payroll.
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Elgin Police Valuation 19
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SECTION IV
ACTUARIAL ASSUMPTIONS AND METHOD
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Actuarial Assumptions Used in Valuation
IMortality Rate For active members - - UP-1984 Mortality Table Set
forward 1 year.
IFor former members other than disabled pensioners
- - UP-1984 Mortality Table; set forward 1 year
Ifor males, set back 4 years for females .
For disability pensioners - - Disability Annuity
Mortality Table as published by the Railroad
IRetirement Board.
Interest 8.5% per annum net of expenses.
IWithdrawal Special table which varies by age.
I Retirement for Age A table of retirement percentages accounting for
the tendency toward early retirement as follows:
Percentage of Active Group
IAge Assumed to Retire
50 40%
I 51 30
52 20
53 15
I 54 10
55 25
56 20
57 15
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58 15
59 10
60 10
I 61 15
62 20
63 25
I 64 30
65 100
ISalary Index 5.5% increase per annum.
Expenses and Contingencies No loading has been included.
IAssets Valued at amortized cost .
Disability Special table.
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IElgin Police Valuation 20
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Illustration of Assumptions Used in Valuation for Member
IHired at Age 28
(Percentage of Remaining Active Members)
IMortality Rate Withdrawal Disability Retirement
Ade Prior to Retirement Rate* Rate Rate
1 28 0.11% 12.5% 0.03%
29 0. 11 12.0 0.03
30 0. 11 11 .5 0.03
I 31 0. 12
11 .0 0.03
32 0. 12 10.6 0.04
33 0. 13 10. 1 0.04
II 34 0.14 8.7 0.04
35 0. 15 9.2 0.04
36 0.16 8.7 0.04
I 37 0. 18 8.3 0.04
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
42 0.28 6.0 0.06
43 0.31 5.5 0.06
I 44 0.34 5. 1 0.07
45 ' 0.38 4.6 0.08
46 0.42 4. 1 0.08
I 47 0.46 3.7 0.09
48 0.51 3.2 0.10
49 0.56 2.8 0. 12
50 0.62 2.3 0. 13 40.00%
I51 0.69 0. 14 30.00
52 0.75 0. 16 20.00
53 0.83 0. 18 15.00
I 54 0.90 0.21 10.00
55 0.99 0.24 25.00
56 1 .08 0.29 20.00
I 57 1 . 19 0.34 15.00
58 1 .30 0.40 15.00
59 1 .42 0.47 10.00
60 1 .55 0.60 10.00
I61 1 .70 0.77 15.00
62 1 .87 0.96 20.00
63 2.05 1 . 19 25.00
I 64 2.26 1 .44 30.00
65 100.00
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* No withdrawals assumed after age 50.
IElgin Police Valuation 21
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Service Table
IIllustrating effect of mortality, withdrawal, disability
and retirement assumptions for age 28 at employment
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Number of Members Number of Members
II Age Remaining in Service Age Remaining in Service
28 1 ,000 53 51
29 874 54 43
30 768 55 38
I 31 678 56 28
32 602 57 22
33 538 58 18
II 34 482 59 15
35 440 60 14
36 398 61 12
I 37 363 62 10
38 332 63 8
39 305 64 5
40 282 65 4
I 41 262
42 244
43 229
I 44 215
45 203
46 193
I 47 184
48 176
49 170
50 164
I 51 93
52 64
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IElgin 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 difference, it is paid off over a set period of years just
as a conventional 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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11 Elgin Police Valuation 2 3
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ISECTION V
GASB STATEMENT 5 PENSION DISCLOSURES
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MUNICIPALITY: City of Elgin AS OF: December 31 , 1994
GASB STATEMENT 5 PENSION DISCLOSURES
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POL. PEN.
a. Plan Descriptions
Annual Covered Payroll
(Calendar/Fiscal Year) $5,421 ,928
Employee/Beneficiary Membership
Retirees and Beneficiaries
Currently receiving benefits
and terminated employees
entitled to benefits but
not yet receiving them 64
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Current Employees
1 Vested 66
Nonvested 60
TOTAL 190
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Elgin Police Valuation 24
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11 MUNICIPALITY: City of Elgin AS OF: December 31 , 1994
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GASB STATEMENT 5 PENSION DISCLOSURES
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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:
■ Pension Benefit Obligation
Standardized Disclosure Measure Yes? X
Credited Projected Benefits Method No?
Substitute Disclosure Measure Yes?
Entry Age Normal Method No? X
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Actuarial Valuation Date December 31 , 1994
Significant Actuarial Assumptions
a) Rate of return on investment 8.5%
of present and future asset compounded annually
b) Projected salary increases 5.5%
compounded annually
c) Post-retirement benefit increases 3.0%
compounded annually
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Elgin Police Valuation 25
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MUNICIPALITY: City of Elgin AS OF: December 31 , 1994
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GASB STATEMENT 5 PENSION DISCLOSURES
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POL. PEN.
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c. Funding Status and Progress (cont . )
Pension Benefit Obligation
Retirees and beneficiaries
currently receiving benefits
and terminated employees not
yet receiving benefits $14,380,780
Current employees
Accumulated employee contributions $ 3,787,396
Employer- Financed Vested $ 9,036,356
Employer- Financed Non-Vested $ -180,492
Total Pension Benefit Obligation $27,024,040
Net assets available for benefits $27,025,728
Unfunded (assets in excess of
pension benefit obligation) $ -1 ,688
11 Effects on the pension benefit
obligation of current year changes
Current-year changes in the actuarial
assumptions, benefit provisions, and
methodology resulted in an increase
(decrease) in the pension benefit
obligation as compared to the amount
of the PBO calculated irrespective of
such changes, of N/A
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Elgin Police Valuation 26
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MUNICIPALITY: City of Elgin AS OF: December 31 , 1994
GASB STATEMENT 5 PENSION DISCLOSURES
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POLICE PEN.
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d . Actuarially determined contribution
requirements and contribution made
(cont. )
11 Effects on the contribution requirements
of current-year changes
Current-year changes in the actuarial
assumptions, actuarial funding method,
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 N/A
e. Actuarially determined contribution
requirement - Employer $99,661
Normal Cost
Amortization of Unfunded Actuarial $28,000
Accrued Liability
TOTAL $127,661
Note: The contribution amounts in item (e) are based on a valuation date
11 as noted at the top of this page. They constitute the contribution
for the Fiscal Year starting on that date, which will be collected
by the City during the 1996 Fiscal Year.
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Elgin Police Valuation 27
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MUNICIPALITY: City of Elgin AS OF: December 31 , 1994
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GASB STATEMENT AS STA EM T 5 PENSION DISCLOSURES
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Police
IIYear Pension
IIf . Trend Information
Net assets available for benefits 1991 105.7%
II as a % of the pension benefit 1992 104.9%
obligation (PBO) 1993 99.9%
1994 100.0%
IUnfunded (assets in excess of)
PBO as a % of annual covered
II payroll (expressing the unfunded
pension benefit obligation as a
percentage of annual covered 1991 (27.0)%
II payroll approximately adjusts for 1992 (22.6)%
the effects of inflation for 1993 0.4 %
analysis purposes) 1994 0.0 %
IIEmployer contributions as a 1991 5.3%
% of annual covered payroll 1992 5.5%
I 1993
2.3%
1994 2.4%
I Required 1991
1992 $ 77,941
$113,484
1993 $109,325
1994 $118,599
IIMade 1991 $230,283
1992 $269,472
11 1993 $125,093
1994 $132,319
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Note: "Year" means the Fiscal Year ending in the calendar year.
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IElgin Police Valuation 28
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MUNICIPALITY: City of Elgin AS OF: December 31 , 1994
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POLICE PENSION FUND
IIREQUIRED SUPPLEMENTARY INFORMATION
IANALYSIS OF FUNDING PROGRESS
II (4) (6)
Unfunded Unfunded pension
(1) (2) (3) pension (5) benefit obligation
II Net assets Pension Percentage benefit Annual as a percentage
available benefit Funded obligation covered of covered payroll
for benefits obligation (1)/(2) (2)-(1) payroll (4)1(5)
I 1985
1986
1 1987
II 1988
1989 $17,874,229 $16,998,493 105.2 $ (875,736) $3,628,204 (24.1)
II1990 $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)
II1992 $23,777,671 $22,669,021 104.9 $(1 ,108,650) $4,900,296 (22.6)
II1993 $25,476,625 $25,497,696 99.9 $ 21 ,071 $5,348,385 0.4
1994 $27,025,728 $27,024,040 100.0 $ (1 ,688) $5,421 ,928 0.0
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IIElgin Police Valuation 29
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IIMUNICIPALITY: City of Elgin AS OF: December 31 , 1994
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POLICE PENSION FUND
IIREQUIRED SUPPLEMENTARY INFORMATION
IREVENUES BY SOURCE AND EXPENSES BY TYPE
IIRevenues by Source
Fiscal Employee Employer Investment
IIYear Contributions Contributions Income Totals
1985 $247,296 $352,333 $1 , 154, 108 $1 ,753,737
1986 $262,952 $425,191 $1 ,271 ,828 $1 ,959,971
1987 $287,580 $515,480 $1 ,391 ,843 $2, 194,903
11 1988 $315,878 $502,878 $1 ,560, 135 $2,378,891
1989 $316,564 $568,219 $1 ,723,439 $2,608,222
1990 $349,593 $349,698 $1 ,841 ,366 $2,540,657
1991 $389,329 $230,283 $2,018,633 $2,638,245
1992 $445, 155 $269,472 $2,026, 187 $2,740,814
1993 $469,739 $125,093 $2, 101 , 173 $2,696,005
1994 $486,799 $132,319 $2,073,372 $2,692,490
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Expenses by Type
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Fiscal Administrative
IYear Benefits Expenses Refunds Totals
1985 $ 334,930 $ 36,069 $ 0 $ 370,999
1986 $ 377,893 $ 72,725 $ 0 $ 450,618
I 1987 $ 410,066 $ 94,093 $14,900 $ 519,059
1988 $ 526, 158 $ 54,749 $21 ,292 $ 602, 199
1989 $ 652,079 $ 99,347 $10,337 $ 761 ,763
I 1990 $ 708,624 $(229,523) $31 ,232 $ 510,333
1991 $ 794,074 $ (95, 156) $41 ,639 $ 740,557
1992 $ 888,408 $(189,822) $50,326 $ 748,912
II 1993 $ 954,422 $ 42,629 $ 0 $ 997,051
1994 $1 ,072,617 $ 41 ,895 $28,875 $1 , 143,387
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IElgin Police Valuation 30
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Police Pension Fund
Projection of Required Contributions
Funding Accomplished by the Year 2033
Fiscal Year Ending December 31
1995 1996 1997 1998 1999
1 . Annual base salaries of $5,421 ,928 $5,593,511 $5,854,234 $6,076,362 $6,342, 177
members
2. Normal cost as a percent 8.44% 8.44% 8.44% 8.44% 8.44%
of salaries
3. Normal cost 457,880 472,092 494,097 512,845 535,280
4. Payment to amortize UAL 128,640 135,715 143, 180 151 ,054 159,362
5. Interest to end of year 49,854 51 ,664 54, 169 56,431 59,045
on (3) and (4)
6. Gross contribution = (3 + $ 636,374 $ 659,471 $ 691 ,446 $ 720,330 $ 753,687
4 + 5)
7. Expected member
contributions with
interest to year end 508,713 524,811 549,274 570, 115 595 ,055
8. Net contribution due from
City $ 127,661 $ 134,660 $ 142, 172 $ 150,215 $ 158,632
9. Contribution as a percent
of annual base salaries 2.4% 2.4% 2.4% 2.5% 2.5%
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.
(4) Salaries of new hires were assumed to be as follows:
Year Salary
1995 $32,713
1996 $34,513
1997 $36,411
1998 $38,413
1999 $40,526
Elgin Police Valuation 31
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Police Pension Fund
Salary Projection
Fiscal Year Ended December 31
1995 1996 1997 1998 1999
1 . Salaries at
beginning of year $5,421 ,928 $5,593,511 $5,854,234 $6,076,362 $6,342, 177
2. Expected salary
increases 298,206 307,643 321 ,983 334,200 348,820
3. Expected
retirements (388,327) (115,946) (245,499) (222,037) (196, 139)
4. Replacement hires 261 ,704 69,026 145,644 153,652 121 ,578
5. Salaries at end
of year $5,593,511 $5,854,234 $6,076,362 $6,342, 177 $6,616,436
Elgin Police Valuation 32
Police Officers Assumed to Retire
During the Five Years 1995 - 1999
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II ASSUMED YEAR
OF
NAME RETIREMENT
EBERNER 1995
BRADISH 1995
IIEGGERT 1995
GONZALEZ 1995
11 LANDWEHR 1995
OLSEN 1995
1 SCHROEDER 1995
UFLAND, F 1995
ILUNDSBERG 1996
PANZLOFF 1996
ICOPHER 1997
HANNELL 1997
EKELLY 1997
MORRISON 1997
1 FREY 1998
NELSON 1998
IROUSE 1998
UFLAND, E 1998
11 BERG 1999
HEINE 1999
11 MONEYHUN 1999
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11 Elgin Police Valuation 33
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