City Council Study Session Agenda and Packet 2017 05 09

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Statewide Defined Benefit Plan for members of affiliated Social Security Employers Separate Retirement Account (SRA) Description The SRA is made up of excess employer contributions that are not needed to fund the Statewide Defined Benefit Plan in a given year. Each year an actuarial study is conducted to determine the contribution rate necessary to fully fund the current and projected benefits. To the extent the contribution level is determined to be less than the required contribution rate the Board may, but is not required to, allocate any or all of the excess employer contribution for the coming year to the SRA. The SRA is invested in the FPPA Members' Benefit Investment Fund and subject to the earnings and losses of the fund until a member distributes or transfers the balance of his or her SRA upon retirement or entry into DROP. Payments The SRA is available for distribution upon approval for a normal, vested, early or deferred retirement. Payment options include a lump sum, or a member may choose to convert all or a portion to a "monthly lifetime benefit"which may include a survivor benefit and a benefit adjust- ment. The "conversion to a monthly benefit"option must be elected prior to any pension payment from the Statewide Defined Benefit Social Security Supplemental Plan. Transfers Alternatively, the SRA is available for transfer to the Fire and Police Members' Self -Directed Investment Fund at any time after retirement or entry into DROP. Transfers to the Self -Directed Investment Fund (FPPA SRA account) are irrevocable. Accounts within the FPPA Self Directed Investment Fund may be subject to certain fees. Distributions from this account are established with the record keeper for the fund (currently Fidelity Investments) and may include lump sum, periodic payments, a combination, or the purchase of a monthly lifetime benefit or an annuity. The collective Separate Retirement Accounts make up the Stabilization Reserve Account. If the SWDB plan becomes actuarially unsound (not able to pay its accrued liabilities amortized over a 40 year period), the Board may use all or a portion of the active member balances in the Separate Retirement Accounts to fund the defined benefit plan. Funds could not be used from the retired member's SRA. For purposes of this provision a member participating in DROP is considered retired. Safeguards The collective Separate Retirement Accounts attributable to the standard contribution rate make up the Stabilization Reserve Account. If the SWDB plan becomes actuarially unsound (not able to pay its accrued liabilities amortized over a 40 year period), the Board may use all or a portion of the active member balances in the Separate Retirement Accounts to fund the defined benefit plan. Funds could not be used from the reentry or the retired member's SRAs. For purposes of this provision a member participating in DROP is considered retired. There are additional safeguards that can be engaged if the SWDB plan became actuarially unsound. Examples include, increasing the retirement age incrementally up to as high as age 60 or decreasing the future benefit accruals (i.e. reducing the 2.5% for service years after 10 years to 2.0% for future service accruals). The plan is currently actuarially sound and no changes to the retirement age or benefits are anticipated at this time under current plan assumptions. Factors that affect whether the plan is actuarially unsound include actual market returns, expected future rates of return, and actuarial assumptions. Such actuarial assumptions include mortality estimates and experience, salary improvements, and inflation.