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20.0 Milliman MSD 12-31-17 Actuarial Valuation FINAL Milliman Actuarial Valuation METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN Actuarial Valuation as of December 31, 2017 Plan Year: January 1, 2018 to December 31, 2018 Prepared by Michael Zwiener, FSA, MAAA Consulting Actuary William Winningham, EA, MAAA Consulting Actuary Milliman, Inc. 500 North Broadway, Suite 1750 St. Louis, MO 63102 USA Tel +1 314 231 3031 milliman.com June 1, 2018 . Metropolitan St. Louis Sewer District Employees’ Pension Plan December 31, 2017 Actuarial Valuation Contents Page Introduction and Purpose 1 Actuarial Certification 2 Discussion of Valuation Results 4 Summary of Valuation Results 6 Statement of Assets as of December 31, 2017 7 Statement of Income and Disbursements 8 Development of Actuarial Value of Assets 9 Actuarial Balance Sheet 10 Development of Recommended Contribution 11 Determination of Amortization Charges for the Recommended Contribution 12 Determination of (Gain)/Loss for Plan Year Ending 13 December 31, 2017 Actuarial Assumptions and Methods 14 Summary of Plan Provisions 17 Summary of Member Data 22 Historical Trends 26 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 1 Metropolitan St. Louis Sewer District Employees’ Pension Plan December 31, 2017 Actuarial Valuation Introduction and Purpose In this report, we present the results of the December 31, 2017 actuarial valuation for the Metropolitan St. Louis Sewer District Employees’ Pension Plan. The report has been prepared at the request of the District’s Board for the sole use of the Board and the Metropolitan St. Louis Sewer District as the contributing plan sponsor. PURPOSES OF THE VALUATION The actuarial valuation of the Plan is intended to accomplish several purposes: • The determination of the recommended level of employer contributions for the 2018 calendar year • Assessment of the relative funded position of the plan on an ongoing basis, i.e., through a comparison of plan assets and projected plan liabilities This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 2 Metropolitan St. Louis Sewer District Employees’ Pension Plan December 31, 2017 Actuarial Valuation Actuarial Certification As requested, we have performed an actuarial valuation of the Metropolitan St. Louis Sewer District Employees’ Pension Plan as of December 31, 2017 for determining contributions for the calendar year ending December 31, 2018. Our findings are set forth in this actuary’s report. This report reflects the benefit provisions in effect on December 31, 2017. In preparing this report, we relied, without audit, on information (some oral and some in writing) supplied by the District and U.S. Bank. This information includes, but is not limited to, statutory provisions, employee data, and financial information. We found this information to be reasonably consistent and comparable with information used for other purposes. The valuation results depend on the integrity of this information. If any of this information is inaccurate or incomplete, our results may be different, and our calculations may need to be revised. Actuarial assumptions, including discount rates, mortality tables, and others identified in this report, and actuarial cost methods are prescribed by the District. The District is responsible for selecting the plan’s funding policy, actuarial valuation methods, asset valuation methods, and assumptions. The policies methods and assumptions used in this valuation are those that have been so prescribed and are described in the Actuarial Basis of this report. This valuation report is only an estimate of the Plan’s financial condition as of a single date. It can neither predict the Plan’s future condition nor guarantee future financial soundness. Actuarial valuations do not affect the ultimate cost of Plan benefits, only the timing of Plan contributions. While the valuation is based on an array of individually reasonable assumptions, other assumption sets may also be reasonable and valuation results based on those assumptions would be different. No one set of assumptions is uniquely correct. Determining results using alternative assumptions is outside the scope of our engagement. Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan’s funded status); and changes in plan provisions or applicable law. Due to the limited scope of our assignment, we did not perform an analysis of the potential range of future measurements. The District has the final decision regarding the appropriateness of the assumptions and adopted them as indicated in this report. Actuarial computations presented in this report are for purposes of determining the recommended funding amounts for the District. The calculations in the enclosed report have been made on a This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 3 basis consistent with our understanding of the District’s funding requirements and goals as well as our understanding of the plan provisions described on pages 17-21 of this report. Determinations for purposes other than meeting these requirements may be significantly different from the results contained in this report. Accordingly, additional determinations may be needed for other purposes. Milliman’s work is prepared solely for the internal business use of the Metropolitan St. Louis Sewer District. To the extent that Milliman’s work is not subject to disclosure under applicable public records laws, Milliman’s work may not be provided to third parties without Milliman’s prior written consent. Milliman does not intend to benefit or create a legal duty to any third party recipient of its work product. Milliman’s consent to release its work product to any third party may be conditioned on the third party signing a Release, subject to the following exceptions: (a) The District may provide a copy of Milliman’s work, in its entirety, to the Plan’s professional service advisors who are subject to a duty of confidentiality and who agree to not use Milliman’s work for any purpose other than to benefit the Plan. (b) The District may provide a copy of Milliman’s work, in its entirety, to other governmental entities, as required by law. No third party recipient of Milliman’s work product should rely upon Milliman’s work product. Such recipients should engage qualified professionals for advice appropriate to their own specific needs. The consultants who worked on this assignment are pension actuaries. Milliman’s advice is not intended to be a substitute for qualified legal or accounting counsel. The signing actuaries are independent of the plan sponsor. We are not aware of any relationship that would impair the objectivity of our work. On the basis of the foregoing, we hereby certify that, to the best of our knowledge and belief, this report is complete and accurate and has been prepared in accordance with generally recognized and accepted actuarial principles and practices. We are members of the American Academy of Actuaries and meet the Qualification Standards to render the actuarial opinion contained herein. We respectfully submit the following report, and we look forward to discussing it with you. Respectfully submitted, Michael J. Zwiener, FSA William D. Winningham, EA Consulting Actuary Consulting Actuary Joint Board Enrollment #17-03686 Joint Board Enrollment #17-06367 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 4 Metropolitan St. Louis Sewer District Employees’ Pension Plan December 31, 2017 Actuarial Valuation Discussion of Valuation Results 1. Contribution Recommendation The results of this valuation are used to determine recommended contribution rates to the Plan for the 2018 calendar year. A comparison of recommended contribution rates for the current and immediately preceding valuations is shown below: Actuarial Valuation as of December 31, 2016 December 31, 2017 Applies to Calendar Year 01/01/17-12/31/17 01/01/18-12/31/18 Recommended Contribution (end of year) $12,328,093 $12,493,916 Actual Contribution 12,328,093 N/A There was a slight increase in the recommended contribution as compared to the preceding year. The primary reasons for the increase were return on the actuarial value of assets below the prior year assumed rate of 7.0% and the lowering of the expected rate of return on assets from 7.0% to 6.9%. 2. Plan Assets The market value of plan assets increased from $251,010,031 at December 31, 2016 to $277,976,215 at December 31, 2017. A balance sheet and statement of income and disbursements are presented on pages 7 and 8, respectively. The net market rate of return was 12.2% for the period. The actuarial value of assets increased from $260,826,650 at December 31, 2016 to $271,048,527 at December 31, 2017. The development of the December 31, 2017 actuarial value of assets is presented on page 9. The net actuarial rate of return for the period was 5.3% vs. the assumed rate of 7%. Due to the asset smoothing method used, there are $6,927,688 of net investment gains that have not yet been recognized in the Actuarial Value of Assets (see page 9). 3. Actuarial Assumptions, Methods and Plan Provisions The discount rate was decreased from 7.00% to 6.90%. All other actuarial assumptions, methods and plan provisions remained the same as the prior year. Descriptions of these can be found on pages 14-21. The funding method is the Entry Age Normal method where Normal Costs are computed as a level percent of pay. The Unfunded Accrued Liability is amortized over a period of 20 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 5 years. The annual amortization payment is calculated as a level dollar amount. The amortization period was reset to 20 years for all outstanding bases effective December 31, 2008. 4. Plan Population The number of active members included in the valuation decreased from 626 in the previous valuation to 595 in the current valuation. The number of retired members, disabled members and beneficiaries increased from 717 to 722. The number of deferred vested members increased from 174 to 178. A detailed reconciliation can be found on page 25. 5. Actuarial Experience The Plan experienced a small overall net actuarial gain for the Plan year ending December 31, 2017. The major components of the gain are summarized below. (Gain)/Loss Loss on Actuarial Assets $3,480,000) Salary Increases Lower than Expected (1,149,000) Liability Gain on All Other Sources (2,710,000) Net Actuarial Gain ($379,000) 6. GASB Statements 67 and 68 Disclosures GASB Statements 67 and 68 disclosures will be presented in a separate report. Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2017 Actuarial Valuation Summary of Valuation Results Valuation Date Valuation Date December 31, 2016 December 31, 2017 Number of Members: Active 626 595 Retired Members 575 579 Disabled Members 21 21 Beneficiaries 121 122 Terminated Vested Members 174 178 Total 1,517 1,495 Market Value of Assets $251,010,031 $277,976,215 Actuarial Value of Assets 260,826,650 271,048,527 Present Value of Future Benefits 361,206,402 369,206,903 Entry Age Normal Accrued Liability 318,049,216 326,365,153 Unfunded Entry Age Normal Accrued Liability 57,222,566 55,316,626 Recommended Contribution 12,328,093 12,493,916 Covered Payroll 42,054,815 41,868,586 Recommended Contribution as a Percentage of Covered Payroll 29.31%29.84% Present Value of Accrued Benefits 281,644,036 291,507,918 6 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2017 Actuarial Valuation Statement of Assets as of December 31, 2017 Assets Market Value 1.Mutual Funds $50,068,771 2.Corporate Obligations 20,901,966 3.Collective Investment Fund 177,575,539 4.Domestic Common Stocks 8,693,711 5.US Treasury and Agency Obligations 17,350,296 6.Money Markets 1,931,354 7.Foreign Stocks 562,889 8.Municipal Obligations 762,356 9.Interest and Dividends Receivable 263,078 Total Assets 278,109,960 Liabilities 1.Accrued Expenses 133,745 Total Liabilities 133,745 Net Assets $277,976,215 7 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2017 Actuarial Valuation Statement of Income and Disbursements 1.Market Value of Assets as of January 1, 2017 $251,010,031 2.Income a.Employer Contributions 12,328,093 b.Investment Income (Including Realized and Unrealized Capital Gains/Losses)31,337,493 c.Total Income 43,665,586 3.Disbursements a.Employee Benefit Distributions 15,858,355 b.Expenses 841,047 c.Total Disbursements 16,699,402 4.Net Increase / (Decrease)26,966,184 = (2c) - (3c) 5.Market Value of Assets as of December 31, 2017 $277,976,215 = (1) + (4) 6.Rate of Return 12.2% 8 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2017 Actuarial Valuation Development of Actuarial Value of Assets 2017 2016 Plan Year Plan Year Prior Year Actuarial Value of Assets $260,826,650 $259,774,260 Contributions 12,328,093 10,145,562 Benefit Payments (15,858,355)(15,260,904) Expenses (841,047)(894,873) Expected Return 18,257,866 18,184,198 Net Adjustment 13,886,557 12,173,983 12/31/2017 12/31/2016 12/31/2015 Market Value $277,976,215 $251,010,031 $244,212,239 2017 Adjustment N/A 13,886,557 13,886,557 2016 Adjustment N/A N/A 12,173,983 Adjusted Market Value 277,976,215 264,896,588 270,272,779 Actuarial Value of Assets 271,048,527 (Average of Adjusted Market Values) Return on Actuarial Value 13,752,139 Rate of Return on Actuarial Value 5.3% 9 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2017 Actuarial Valuation Actuarial Balance Sheet The key elements of the actuarial funding process are illustrated in the Actuarial Balance Sheet. The format of the balance sheet captures the essential purpose of an actuarial cost method - the determination of assets sufficient to provide for pension benefits. The Actuarial Present Value of Current and Prospective Plan Benefits is the liability that must be balanced by Current and Prospective assets. The Present Value of Future Normal Cost Contributions represents the prospective assets from contributions that will be made for costs allocated to the future. December 31, 2017 Liabilities 1.Actuarial Present Value of Future Benefits a.Active Members $188,891,113 b.Terminated Vested Members 7,197,581 c.Retired Members 152,038,189 d.Disabled Members 4,089,550 e.Beneficiaries 16,990,470 f.Total 369,206,903 Assets 1.Current Valuation Assets a.Actuarial Value of Assets 271,048,527 2.Prospective Valuation Assets a.Unfunded Actuarial Accrued Liability 55,316,626 b.Present Value of Future Normal Cost Contributions 42,841,750 3.Total 369,206,903 10 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2017 Actuarial Valuation Development of Recommended Contribution December 31, 2017 1.Present Value of Future Benefits a.Active Members $188,891,113 b.Terminated Vested Members 7,197,581 c.Retired Members 152,038,189 d.Disabled Members 4,089,550 e.Beneficiaries 16,990,470 f.Total 369,206,903 2.Present Value of Future Normal Costs 42,841,750 3.Entry Age Accrued Liability: (1f) - (2)326,365,153 4.Actuarial Value of Assets 271,048,527 5.Entry Age Unfunded Accrued Liability: (3) - (4)55,316,626 6.Entry Age Normal Cost 5,238,812 7.Covered Payroll 41,868,586 8.Amortization of Unfunded Actuarial Accrued Liability 6,448,668 9.Recommended Contribution at Beginning of Year: (6) + (8)11,687,480 10.Recommended Contribution at End of Year 12,493,916 11.Recommended Contribution as a Percentage of Payroll Normal Cost 13.38% Amortization Payment 16.46% Total 29.84% 11 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2017 Actuarial Valuation Determination of Amortization Charges for the Recommended Contribution Initial Unamortized Unamortized Date Initial Amortization Base Contribution Base Amortization Incurred Description Balance Period December 31, 2016 To Base December 31, 2017 Payment 12/31/2008 Amortization Restarted 28,387,059 20 19,303,828 2,898,223 17,756,873 2,553,611 12/31/2009 Experience Loss 9,801,628 20 7,167,625 999,317 6,670,042 880,123 12/31/2010 Experience Loss 6,504,951 20 5,059,938 662,830 4,751,304 583,539 03/31/2011 Plan Change (374,381)20 (295,766)(38,129)(278,341)(33,564) 12/31/2011 Experience Gain (5,769,079)20 (4,737,706)(587,214)(4,482,131)(516,767) 12/31/2011 Assumption Changes 14,265,441 20 11,715,122 1,452,027 11,083,154 1,277,830 12/31/2012 Experience Gain (2,111,370)20 (1,818,196)(214,758)(1,730,712)(188,923) 12/31/2013 Assumption Change (269,285)20 (241,729)(27,362)(231,288)(24,062) 12/31/2013 Experience Gain (4,827,108)20 (4,333,150)(490,472)(4,145,999)(431,314) 12/31/2014 Experience Gain (6,122,993)20 (5,737,136)(611,033)(5,527,703)(537,025) 12/31/2014 Assumption Changes 6,500,227 20 6,090,596 648,678 5,868,260 570,111 12/31/2015 Experience Loss 2,577,288 20 2,500,097 257,195 2,417,909 225,962 12/31/2016 Experience Loss 10,884,162 20 10,884,162 1,086,166 10,559,887 953,936 12/31/2016 Assumption Changes 11,664,881 20 11,664,881 1,164,076 11,317,347 1,022,361 12/31/2017 Experience Gain (379,023)20 N/A N/A (379,023)(33,208) 12/31/2017 Assumption Change 1,667,047 20 N/A N/A 1,667,047 146,058 Total 72,399,445 57,222,566 7,199,544 55,316,626 6,448,668 12 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2017 Actuarial Valuation Determination of (Gain)/Loss for Plan Year Ending December 31, 2017 1.Unfunded Accrued Liability as of December 31, 2016 $57,222,566 2.Normal Cost due December 31, 2016 5,157,148 3.Interest on (1) and (2) at 7.00%4,366,580 4.Employer Contributions for the Prior Plan Year 12,328,093 5.Interest on (4) at 7.00%389,599 6.Change in Unfunded Accrued Liability due to Actuarial Assumption Change 1,667,047 7.Change in Unfunded Accrued Liability due to Plan Amendment 0 8.Expected Unfunded Actuarial Accrued Liability as of December 31, 2017 55,695,649 = (1) + (2) + (3) - (4) - (5) + (6) + (7) 9.Entry Age Accrued Liability as of December 31, 2017 326,365,153 10.Actuarial Value of Assets as of December 31, 2017 271,048,527 11.Unfunded Actuarial Accrued Liability as of December 31, 2017: (9) - (10)55,316,626 12.(Gain)/Loss for Plan Year Ending December 31, 2017: (11) - (8)(379,023) 13 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 14 Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2017 Actuarial Valuation Actuarial Assumptions and Methods Interest (Effective December 31, 2017) 6.90%, compounded annually. For the previous valuation, the assumption was 7.00%, compounded annually. Salary Increases 4.25% per annum Social Security Wage Base Assumed to increase at a rate of 3.50% per annum Inflation 2.50% per annum Mortality (Effective December 31, 2016) Healthy Lives, pre-retirement: RP-2014 Employees Mortality Table, male and female rates, with generational projection from 2006 based on the MP-2017 improvement scale (improvement scale updates published annually) Healthy Lives, post-retirement: RP-2014 Healthy Annuitant Mortality Table, male and female rates, with generational projection from 2006 based on the MP-2017 improvement scale (improvement scale updates published annually) Disabled Lives: RP-2014 Disabled Mortality Table, male and female rates This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 15 Withdrawal Select rates based on service, ultimate rates based on attained age. Ultimate rates are from the Sarason T-1 Table. Rates at selected ages are: Select Rates Ultimate Rates Years of Service Percent Terminating Age Percent Terminating 0 20 20 5.5 1 12 30 3.7 2 7.5 40 1.1 50 & over 0.0 Retirement Rates vary by age as follows: Percent Retiring Age Before 75 Points After 75 Points 55 1% 10% 56 2 10 57 2 10 58 2 10 59 3 10 60 4 15 61 5 15 62 20 35 63 10 25 64 20 25 65 100 100 Disability Rates at selected ages are: Age Percent Becoming Disabled 20 0.056 30 0.064 40 0.102 50 0.311 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 16 Expenses None assumed Marriage 80% of members are assumed to be married at the time of withdrawal, retirement, death or disability. Males are assumed to be 3 years older than their spouses. Form of Payment All members are assumed to elect the 5 Year Certain and Life Annuity. Actuarial Cost Method The Entry Age Normal Cost Method on a closed group basis was used. Normal costs are computed as a level percent of pay. Changes in the Entry Age Normal Unfunded Accrued Liability (UAL) are amortized on a level dollar basis over layered 20 year periods. For the December 31, 2008 valuation, the amortization period for outstanding bases was reset to 20 years. Asset Valuation Method The Actuarial Value of Assets is equal to the average of the Adjusted Market Values for the current and two previous valuation dates. The Adjusted Market Value for the current valuation date is equal to the Market Value of Assets. The Adjusted Market Values for the two previous valuation dates are equal to the Market Values as of the respective valuation dates increased for contributions and expected return on Actuarial Assets and decreased for benefit payments and expenses. This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 17 Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2017 Actuarial Valuation Summary of Plan Provisions A summary of the current primary provisions of the Plan is presented below. A complete description of the provisions can be found in Ordinance 13796 as amended by Ordinance 14776. Effective Date Originally effective November 1, 1967; most recently restated effective January 1, 2014. Eligibility Members become eligible after their first hour of employment. The plan was closed to new entrants effective January 1, 2011. Employee Employed on a regular, full-time permanent basis; 1,000 hours deemed full-time. Does not include technical personnel employed on special occasions. Earnings Base pay excluding unpaid leaves of absence (other than on account of military service), bonuses, overtime and any other additional compensation, determined without regard to salary reductions under Sections 125, 132, or 457. Does not include unused sick leave. Final Average Earnings (FAE) Prior to August 1, 2004, the sum of A and B divided by 3: A. Highest 78 consecutive pay periods out of the last 260 pay periods, B. 1.25% of the cash amount paid to a member with respect to unused sick leave, multiplied by the member’s years of Credited Service. After August 1, 2004, the average of the highest 78 consecutive pay periods out of the last 260 pay periods. If a member has less than 78 pay periods, FAE is calculated by dividing the total pay by the actual number of pay periods and then multiplying by 26. This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 18 Continuous Service Elapsed time from date of hire to date of termination including authorized leaves of absence, the imputed employment period solely for determining early retirement reductions, military leave and other absences that do not constitute a termination of employment under the District’s Civil Service Rules Credited Service Elapsed time from date of hire to date of termination including military leave but not including leaves of absence Vesting A member becomes 100% vested upon completion of 60 months of Continuous Service. Normal Retirement Date (NRD) First of the month coincident with or next following age 65 and 60 months of Continuous Service Normal Retirement Benefit Prior to August 1, 2004: 1.45% of FAE multiplied by years and complete months Credited Service, plus 0.4% of FAE in excess of Covered Compensation multiplied by years and complete months of Credited Service, with a maximum of 35 years After August 1, 2004: 1.7% of FAE multiplied by years and complete months Credited Service, plus 0.4% of FAE in excess of Covered Compensation multiplied by years and complete months of Credited Service, with a maximum of 35 years The formula in effect prior to August 1, 2004 based on service, earning and sick leave as of June 1, 2009 is protected as a minimum benefit for certain members for which the prior formula produced higher benefit as of June 1, 2009. Alternate Retirement Date (ARD) Attainment of 80 points upon Separation from Service where points are defined as the sum of the member’s age and Continuous Service. For early retirement reduction, ARD is the date 80 points would have been achieved if service continued to ARD. This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 19 Early Retirement Date (ERD) First of the month coincident with or next following age 55 and 60 months of Continuous Service Early Retirement Benefit 1. The benefit is unreduced if the member has 75 points as of Separation from Service. 2. If the member does not have 75 points as of Separation from Service, the benefit is reduced 1% per year between ages 60 and 65 and 2% per year between ages 55 and 60 from the earlier of the member’s Normal Retirement Date or Alternate Retirement Date. Postponed Retirement Date (PRD) First of the month coincident with or next following Separation from Service after Normal Retirement Date Postponed Retirement Benefit The greater of: 1. Accrued Benefit calculated at Postponed Retirement Date, or 2. Normal Retirement Benefit plus the Actuarial Equivalent of the amount that would have been paid from NRD to PRD accumulated at 4.0% Disability Benefit If a member becomes disabled while in employment after completing three years of service and qualifies for disability under Social Security, an immediate monthly benefit will be payable equal to the greater of: 1. Accrued Benefit calculated at disability date, or 2. 25% of monthly earnings The disability benefit may not exceed the projected Normal Retirement Benefit calculated using average earnings at the disability date. The disability benefit is payable to age 65 as long as the member remains disabled. This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 20 Death Benefit If a member dies while in employment after completing five years of service, an immediate monthly benefit will be payable to his or her beneficiary equal to the greatest of: 1. 50% of the Accrued Benefit calculated at the date of death, or 2. 15% of monthly earnings, or 3. Accrued Benefit payable in a reduced amount under the 100% Contingent Annuitant Option If a terminated vested member dies prior to retirement, an immediate monthly benefit will be payable to his or her beneficiary equal to 50% of the Accrued Benefit. If the beneficiary is the member’s surviving spouse, the benefit will be payable for the spouse’s lifetime. Otherwise, the benefit will be payable to the beneficiary for a period of sixty months without the adjustment for the Contingent Annuitant Option. Lump Sum Death Benefit If a member dies after early or normal retirement, there is a $5,000 death benefit payable to the member’s beneficiary from the Plan only if no life insurance has been paid from another District program. This death benefit is in addition to any monthly survivor benefits that would be payable to the member’s beneficiary under the payment option elected at the time of the member’s retirement. Post Retirement Medical Coverage The District provides individual medical coverage under the same terms as active employees for members who retire after attaining 75 points or age 62. Such coverage shall continue until the member becomes eligible for Medicare or becomes covered under another group medical plan. This benefit is not paid from the Pension Trust, and no liabilities or costs for this benefit are included in this report. Cost-of-Living Adjustment (COLA) For years after January 1, 2001, an annual COLA based on the Consumer Price Index with a maximum annual increase of the lesser of 3% or $50/month, and a lifetime maximum of the lesser of 45% or $750/month. Retirees, beneficiaries and disabled members first become eligible for the COLA on the third January 1st following retirement. This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 21 Normal Form of Payment Five-Year Certain and Life Annuity Optional Forms of Payment Ten-Year Certain and Life Option Life Annuity Option Social Security Option Contingent Annuitant Options (100%, 75%, 66 2/23% or 50%) Contingent Annuitant Options with “Pop-up” (100%, 75%, 66 2/23% or 50%) A member may elect to take 10% of the value of his or her monthly benefit as a lump sum payment with the balance of the benefit payable in one of the forms described above. The lump sum is based on the Plan’s definition of Actuarial Equivalence. Summary of Member Data December 31, 2016 December 31, 2017 1.Active Members (Including Postponed Retirees) a.Count 626 595 b.Plan Compensation $43,914,466 $43,127,493 c.Average Compensation $70,151 $72,483 d.Average Age 51.1 51.7 e.Average Service 18.2 19.0 2.Retired Members a.Count 575 579 b.Total Monthly Benefits $1,088,886 $1,134,993 c.Average Monthly Benefits $1,894 $1,960 3.Disabled Members a.Count 21 21 b.Total Monthly Benefits $32,135 $31,847 c.Average Monthly Benefits $1,530 $1,517 4.Beneficiaries a.Count 121 122 b.Total Monthly Benefits $144,447 $152,720 c.Average Monthly Benefits $1,194 $1,252 5.Terminated Vested Members a.Count 174 178 b.Total Monthly Benefits $87,328 $93,709 c.Average Monthly Benefits $502 $526 22 Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2017 Actuarial Valuation This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2017 Actuarial Valuation Distribution of Active Members by Age and by Years of Service (as of December 31, 2017) YEARS OF CREDITED SERVICE Attained Under 1 1 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 and up Age No.No.No.No.No.No.No.No.No.No.Total Under 25 0 0 0 0 0 0 0 0 0 0 0 25 to 29 0 0 0 0 0 0 0 0 0 0 0 30 to 34 0 0 17 16 0 0 0 0 0 0 33 35 to 39 0 0 27 26 1 0 0 0 0 0 54 40 to 44 0 0 24 22 5 4 1 0 0 0 56 45 to 49 0 0 17 27 21 11 12 0 0 0 88 50 to 54 0 0 18 22 15 22 20 14 0 0 111 55 to 59 0 0 10 24 16 22 30 19 11 1 133 60 to 64 0 0 7 20 11 11 16 9 20 2 96 65 to 69 0 0 0 4 2 2 4 3 4 4 23 70 and up 0 0 0 0 0 0 0 0 0 1 1 Total *0 0 120 161 71 72 83 45 35 8 595 * Includes 24 Postponed Retirees 23 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2017 Actuarial Valuation Distribution of Inactive Members by Age and Average Monthly Benefit Terminated Vested Members Average Monthly Age Number Pension Under 30 0 $0 30 - 34 1 472 35 - 39 7 649 40 - 44 14 681 45 - 49 24 499 50 - 54 40 657 55 - 59 49 546 60 - 64 28 391 65 +15 213 Total 178 526 Retired Members, Beneficiaries and Disabled Members Average Monthly Age Number Pension Under 55 20 $1,390 55 – 59 61 1,890 60 – 64 126 1,895 65 – 69 211 1,906 70 – 74 107 2,050 75 – 79 98 1,838 80 – 84 44 1,827 85 – 89 42 1,133 90 +13 605 Total 722 1,828 24 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2017 Actuarial Valuation Summary of Changes in Member Data Terminated Active Postponed Retired Vested Members Retirees Members Members Total Count as of January 1, 2017 605 21 717 174 1,517 New Entrants 0 0 0 0 0 Moved to Postponed Retirees (11)11 0 0 0 Retired (15)(8)26 (3)0 Became Disabled 0 0 0 0 0 Lump Sum Payouts 0 0 0 0 0 Died with Beneficiary (1)0 (3)0 (4) New Beneficiaries 0 0 4 0 4 Died without Beneficiary 0 0 (19)0 (19) Terminated with Vesting (7)0 0 7 0 Terminated without Vesting 0 0 0 0 0 Rehired 0 0 0 0 0 Certain Period Expired 0 0 (1)0 (1) No Longer Due Benefits 0 0 (2)0 (2) Data Corrections 0 0 0 0 0 Total Changes (34)3 5 4 (22) Count as of December 31, 2017 571 24 722 178 1,495 25 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. Metropolitan St. Louis Sewer District Employees' Pension Plan Valuation Date 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 Active Members 743 689 647 605 571 Postponed Retirees 18 21 18 21 24 Terminated Vested Members 179 180 175 174 178 Retired Members 517 534 556 575 579 Disabled Members 21 22 20 21 21 Beneficiaries 98 104 115 121 122 Total 1,576 1,550 1,531 1,517 1,495 26 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 0 200 400 600 800 1,000 1,200 1,400 1,600 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017ParticipantsMember Data Active Members Postponed Retirees Terminated Vested Members Retired Members Disabled Members Beneficiaries Metropolitan St. Louis Sewer District Employees' Pension Plan Valuation Date Market Value Actuarial Value 12/31/2013 $246,429,986 $237,432,706 12/31/2014 $250,515,821 $253,771,605 12/31/2015 $244,212,239 $259,774,260 12/31/2016 $251,010,031 $260,826,650 12/31/2017 $277,976,215 $271,048,527 27 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. $0 $25,000,000 $50,000,000 $75,000,000 $100,000,000 $125,000,000 $150,000,000 $175,000,000 $200,000,000 $225,000,000 $250,000,000 $275,000,000 $300,000,000 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 Total Assets Market Value Actuarial Value Metropolitan St. Louis Sewer District Employees' Pension Plan Valuation Date Market Value Actuarial Value 12/31/2013 10.9%8.1% 12/31/2014 3.0%8.3% 12/31/2015 -0.8%4.1% 12/31/2016 4.9%2.4% 12/31/2017 12.2%5.3% 28 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 Rate of Return (%) on Total Assets Market Value Actuarial Value Metropolitan St. Louis Sewer District Employees' Pension Plan Valuation Date AVA/AAL 12/31/2013 86.1% 12/31/2014 87.4% 12/31/2015 87.5% 12/31/2016 82.0% 12/31/2017 83.1% 29 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 Funded Ratio: Actuarial Value of Assets (AVA) vs. Actuarial Accrued Liability (AAL) Metropolitan St. Louis Sewer District Employees' Pension Plan Valuation Date Normal Cost 12/31/2013 $5,852,375 ** 12/31/2014 $5,253,091 12/31/2015 $5,106,625 12/31/2016 $5,157,148 12/31/2017 $5,238,812 ** Includes $475,000 load for expenses 30 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. $4,000,000 $4,200,000 $4,400,000 $4,600,000 $4,800,000 $5,000,000 $5,200,000 $5,400,000 $5,600,000 $5,800,000 $6,000,000 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 Normal Cost Metropolitan St. Louis Sewer District Employees' Pension Plan Valuation Recommended Date Contribution 12/31/2013 $10,675,321 ** 12/31/2014 $10,059,004 12/31/2015 $10,145,562 12/31/2016 $12,328,093 12/31/2017 $12,493,916 ** Includes $475,000 load for expenses 31 This work product was prepared solely for the Metropolitan St. Louis Sewer District for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 Recommended Contribution