Loading...
HomeMy Public PortalAbout2018 Actuarial Valuation Milliman Actuarial Valuation METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES' PENSION PLAN Actuarial Valuation as of December 31, 2018 Plan Year: January 1, 2019 to December 31, 2019 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 10, 2019 . Metropolitan St. Louis Sewer District Employees’ Pension Plan December 31, 2018 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, 2018 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, 2018 Actuarial Assumptions and Methods 14 Summary of Plan Provisions 17 Summary of Member Data 22 Actuarial Standard of Practice No. 51 (ASOP 51) 26 Historical Trends 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. 1 Metropolitan St. Louis Sewer District Employees’ Pension Plan December 31, 2018 Actuarial Valuation Introduction and Purpose In this report, we present the results of the December 31, 2018 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 2019 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, 2018 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, 2018 for determining contributions for the calendar year ending December 31, 2019. Our findings are set forth in this actuary’s report. This report reflects the benefit provisions in effect on December 31, 2018. 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 retirement 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, 2018 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 2019 calendar year. A comparison of recommended contribution rates for the current and immediately preceding valuations is shown below: Actuarial Valuation as of December 31, 2017 December 31, 2018 Applies to Calendar Year 01/01/18-12/31/18 01/01/19-12/31/19 Recommended Contribution (end of year) $12,493,916 $12,725,462 Actual Contribution 12,493,916 N/A There was a slight increase in the recommended contribution as compared to the preceding year. The primary reason for the increase was return on the actuarial value of assets below the prior year assumed rate of 6.9%. 2. Plan Assets The market value of plan assets decreased from $277,976,215 at December 31, 2017 to $260,560,576 at December 31, 2018. A balance sheet and statement of income and disbursements are presented on pages 7 and 8, respectively. The net market rate of return was -4.7% for the period. The actuarial value of assets increased from $271,048,527 at December 31, 2017 to $276,771,846 at December 31, 2018. The development of the December 31, 2018 actuarial value of assets is presented on page 9. The net actuarial rate of return for the period was 3.8% vs. the assumed rate of 6.9%. Due to the asset smoothing method used, there are $16,211,270 of net investment losses that have not yet been recognized in the Actuarial Value of Assets. 3. Actuarial Assumptions, Methods and Plan Provisions All 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 in layers over a period of 20 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. 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 4. Plan Population The number of active members included in the valuation decreased from 595 in the previous valuation to 545 in the current valuation. The number of retired members, disabled members and beneficiaries increased from 722 to 748. The number of deferred vested members increased from 178 to 181. A detailed reconciliation can be found on page 25. 5. Actuarial Experience The Plan experienced an overall net actuarial loss for the Plan year ending December 31, 2018. The major components of the loss are summarized below. (Gain)/Loss Loss on Actuarial Assets $8,353,000) Salary Increases Lower than Expected (1,110,000) Liability Gain on All Other Sources (932,000) Net Actuarial Loss $6,311,000) 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, 2018 Actuarial Valuation Summary of Valuation Results Valuation Date Valuation Date December 31, 2017 December 31, 2018 Number of Members: Active 595 545 Retired Members 579 608 Disabled Members 21 21 Beneficiaries 122 119 Terminated Vested Members 178 181 Total 1,495 1,474 Market Value of Assets $277,976,215 $260,560,576 Actuarial Value of Assets 271,048,527 276,771,846 Present Value of Future Benefits 369,206,903 374,287,419 Entry Age Normal Accrued Liability 326,365,153 334,957,313 Unfunded Entry Age Normal Accrued Liability 55,316,626 58,185,467 Recommended Contribution 12,493,916 12,725,462 Covered Payroll 41,868,586 39,437,165 Recommended Contribution as a Percentage of Covered Payroll 29.84%32.27% Present Value of Accrued Benefits 291,507,918 302,787,327 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, 2018 Actuarial Valuation Statement of Assets as of December 31, 2018 Assets Market Value 1.Collective Investment Funds $122,410,744 2.Mutual Funds 55,453,699 3.Real Estate Investments 25,555,188 4.Corporate Obligations 20,350,656 5.US Treasury and Agency Obligations 15,878,117 6.Domestic Common Stocks 9,235,066 7.Money Market Funds 10,299,912 8.Municipal Obligations 754,971 9.Foreign Stocks 538,865 10.Interest and Dividends Receivable 288,581 Total Assets 260,765,799 Liabilities 1.Accrued Expenses 205,223 Total Liabilities 205,223 Net Assets $260,560,576 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, 2018 Actuarial Valuation Statement of Income and Disbursements 1.Market Value of Assets as of January 1, 2018 $277,976,215 2.Income a.Employer Contributions 12,493,916 b.Investment Income (Including Realized and Unrealized Capital Gains/Losses)(12,154,370) c.Total Income 339,546 3.Disbursements a.Employee Benefit Distributions 16,911,759 b.Expenses 843,426 c.Total Disbursements 17,755,185 4.Net Increase / (Decrease)(17,415,639) = (2c) - (3c) 5.Market Value of Assets as of December 31, 2018 $260,560,576 = (1) + (4) 6.Rate of Return -4.7% 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, 2018 Actuarial Valuation Development of Actuarial Value of Assets 2018 2017 Plan Year Plan Year Prior Year Actuarial Value of Assets $271,048,527 $260,826,650 Contributions 12,493,916 12,328,093 Benefit Payments (16,911,759)(15,858,355) Expenses (843,426)(841,047) Expected Return 18,702,348 18,257,866 Net Adjustment 13,441,079 13,886,557 12/31/2018 12/31/2017 12/31/2016 Market Value $260,560,576 $277,976,215 $251,010,031 2018 Adjustment N/A 13,441,079 13,441,079 2017 Adjustment N/A N/A 13,886,557 Adjusted Market Value 260,560,576 291,417,294 278,337,667 Actuarial Value of Assets 276,771,846 (Average of Adjusted Market Values) Return on Actuarial Value 10,141,162 Rate of Return on Actuarial Value 3.8% 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, 2018 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, 2018 Liabilities 1.Actuarial Present Value of Future Benefits a.Active Members $180,204,382 b.Terminated Vested Members 7,924,504 c.Retired Members 165,222,938 d.Disabled Members 4,080,718 e.Beneficiaries 16,854,877 f.Total 374,287,419 Assets 1.Current Valuation Assets a.Actuarial Value of Assets 276,771,846 2.Prospective Valuation Assets a.Unfunded Actuarial Accrued Liability 58,185,467 b.Present Value of Future Normal Cost Contributions 39,330,106 3.Total 374,287,419 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, 2018 Actuarial Valuation Development of Recommended Contribution December 31, 2018 1.Present Value of Future Benefits a.Active Members $180,204,382 b.Terminated Vested Members 7,924,504 c.Retired Members 165,222,938 d.Disabled Members 4,080,718 e.Beneficiaries 16,854,877 f.Total 374,287,419 2.Present Value of Future Normal Costs 39,330,106 3.Entry Age Accrued Liability: (1f) - (2)334,957,313 4.Actuarial Value of Assets 276,771,846 5.Entry Age Unfunded Accrued Liability: (3) - (4)58,185,467 6.Entry Age Normal Cost 4,902,474 7.Covered Payroll 39,437,165 8.Amortization of Unfunded Actuarial Accrued Liability 7,001,606 9.Recommended Contribution at Beginning of Year: (6) + (8)11,904,080 10.Recommended Contribution at End of Year 12,725,462 11.Recommended Contribution as a Percentage of Payroll Normal Cost 13.29% Amortization Payment 18.98% Total 32.27% 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, 2018 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, 2017 To Base December 31, 2018 Payment 12/31/2008 Amortization Restarted 28,387,059 20 17,756,873 2,874,494 16,107,603 2,553,611 12/31/2009 Experience Loss 9,801,628 20 6,670,042 990,718 6,139,557 880,123 12/31/2010 Experience Loss 6,504,951 20 4,751,304 656,866 4,422,278 583,539 03/31/2011 Plan Change (374,381)20 (278,341)(37,782)(259,765)(33,564) 12/31/2011 Experience Gain (5,769,079)20 (4,482,131)(581,703)(4,209,695)(516,767) 12/31/2011 Assumption Changes 14,265,441 20 11,083,154 1,438,401 10,409,491 1,277,830 12/31/2012 Experience Gain (2,111,370)20 (1,730,712)(212,663)(1,637,468)(188,923) 12/31/2013 Assumption Change (269,285)20 (231,288)(27,086)(220,161)(24,062) 12/31/2013 Experience Gain (4,827,108)20 (4,145,999)(485,512)(3,946,561)(431,314) 12/31/2014 Experience Gain (6,122,993)20 (5,527,703)(604,507)(5,304,607)(537,025) 12/31/2014 Assumption Changes 6,500,227 20 5,868,260 641,750 5,631,420 570,111 12/31/2015 Experience Loss 2,577,288 20 2,417,909 254,356 2,330,389 225,962 12/31/2016 Experience Loss 10,884,162 20 10,559,887 1,073,806 10,214,713 953,936 12/31/2016 Assumption Changes 11,664,881 20 11,317,347 1,150,830 10,947,414 1,022,361 12/31/2017 Experience Gain (379,023)20 (379,023)(37,381)(367,795)(33,208) 12/31/2017 Assumption Change 1,667,047 20 1,667,047 164,412 1,617,661 146,058 12/31/2018 Experience Loss 6,310,993 20 N/A N/A 6,310,993 552,938 Total 78,710,438 55,316,626 7,258,999 58,185,467 7,001,606 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, 2018 Actuarial Valuation Determination of (Gain)/Loss for Plan Year Ending December 31, 2018 1.Unfunded Accrued Liability as of December 31, 2017 $55,316,626 2.Normal Cost due December 31, 2017 5,238,812 3.Interest on (1) and (2) at 6.90%4,178,325 4.Employer Contributions for the Prior Plan Year 12,493,916 5.Interest on (4) at 6.90%365,373 6.Change in Unfunded Accrued Liability due to Actuarial Assumption Change 0 7.Change in Unfunded Accrued Liability due to Plan Amendment 0 8.Expected Unfunded Actuarial Accrued Liability as of December 31, 2018 51,874,474 = (1) + (2) + (3) - (4) - (5) + (6) + (7) 9.Entry Age Accrued Liability as of December 31, 2018 334,957,313 10.Actuarial Value of Assets as of December 31, 2018 276,771,846 11.Unfunded Actuarial Accrued Liability as of December 31, 2018: (9) - (10)58,185,467 12.(Gain)/Loss for Plan Year Ending December 31, 2018: (11) - (8)6,310,993 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, 2018 Actuarial Valuation Actuarial Assumptions and Methods Interest (Effective December 31, 2017) 6.90%, 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-2018 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-2018 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, 2018 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, 2017 December 31, 2018 1.Active Members (Including Postponed Retirees) a.Count 595 545 b.Plan Compensation $43,127,493 $40,703,098 c.Average Compensation $72,483 $74,685 d.Average Age 51.7 52.1 e.Average Service 19.0 19.6 2.Retired Members a.Count 579 608 b.Total Monthly Benefits $1,134,993 $1,244,693 c.Average Monthly Benefits $1,960 $2,047 3.Disabled Members a.Count 21 21 b.Total Monthly Benefits $31,847 $32,403 c.Average Monthly Benefits $1,517 $1,543 4.Beneficiaries a.Count 122 119 b.Total Monthly Benefits $152,720 $154,142 c.Average Monthly Benefits $1,252 $1,295 5.Terminated Vested Members a.Count 178 181 b.Total Monthly Benefits $93,709 $100,756 c.Average Monthly Benefits $526 $557 22 Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2018 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, 2018 Actuarial Valuation Distribution of Active Members by Age and by Years of Service (as of December 31, 2018) 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 6 17 0 0 0 0 0 0 23 35 to 39 0 0 15 34 1 0 0 0 0 0 50 40 to 44 0 0 14 30 7 3 0 0 0 0 54 45 to 49 0 0 9 34 6 19 13 0 0 0 81 50 to 54 0 0 6 29 10 22 19 12 1 0 99 55 to 59 0 0 5 30 10 22 31 17 9 0 124 60 to 64 0 0 2 18 6 11 17 16 18 5 93 65 to 69 0 0 1 3 0 2 8 4 0 3 21 70 and up 0 0 0 0 0 0 0 0 0 0 0 Total *0 0 58 195 40 79 88 49 28 8 545 * Includes 21 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, 2018 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 9 715 40 - 44 10 512 45 - 49 29 614 50 - 54 33 587 55 - 59 55 649 60 - 64 30 427 65 +14 218 Total 181 557 Retired Members, Beneficiaries and Disabled Members Average Monthly Age Number Pension Under 55 18 $1,957 55 – 59 55 1,753 60 – 64 132 2,094 65 – 69 216 1,922 70 – 74 136 2,101 75 – 79 87 1,961 80 – 84 55 1,822 85 – 89 33 1,107 90 +16 933 Total 748 1,913 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, 2018 Actuarial Valuation Summary of Changes in Member Data Terminated Active Postponed Retired Vested Members Retirees Members Members Total Count as of January 1, 2018 571 24 722 178 1,495 New Entrants 0 0 0 0 0 Moved to Postponed Retirees (8)8 0 0 0 Retired (28)(11)45 (6)0 Became Disabled 0 0 0 0 0 Lump Sum Payouts 0 0 0 0 0 Died with Beneficiary (2)0 (3)0 (5) New Beneficiaries 0 0 5 0 5 Died without Beneficiary 0 0 (20)0 (20) Terminated with Vesting (9)0 0 9 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 0 0 0 Data Corrections 0 0 0 0 0 Total Changes (47)(3)26 3 (21) Count as of December 31, 2018 524 21 748 181 1,474 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. 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. 26 Metropolitan St. Louis Sewer District Employees' Pension Plan December 31, 2018 Actuarial Valuation Actuarial Standard of Practice No. 51 (ASOP 51) The purpose of this appendix is to identify, assess, and provide illustrations of risks that are significant to the Plan, and in some cases to the Plan’s participants. The results of the actuarial valuation are based on one set of reasonable assumptions. However, it is almost certain that future experience will not exactly match the assumptions. As an example, investments may perform better or worse than assumed in any single year and over any longer time horizon. It is therefore important to consider the potential impacts of these potential differences when making decisions that may affect the future financial health of the Plan, or of the Plan’s participants. In addition, as plans mature they accumulate larger pools of assets and liabilities. This increases the potential risk to plan funding and the finances of those who are responsible for plan funding. As an example, it is more difficult for a plan sponsor to deal with the effects of a 10% investment loss on a plan with $1 Billion in assets and liabilities than if the same plan sponsor is responsible for a 10% investment loss on a plan with $1 Million in assets and liabilities. Since pension plans make long-term promises and rely on long-term funding, it is important to consider how mature the plan is today, and how mature it may become in the future. Actuarial Standard of Practice No. 51 (ASOP 51) addresses these issues by providing actuaries with guidance for assessing and disclosing the risk associated with measuring pension liabilities and the determination of pension plan contributions. Specifically, it directs the actuary to: •Identify risks that may be significant to the plan. •Assess the risks identified as significant to the plan. •Disclose plan maturity measures and historical information that are significant to understanding the plan’s risks. ASOP 51 states that if in the actuary’s professional judgment, a more detailed assessment would be significantly beneficial in helping the individuals responsible for the plan to understand the risks identified by the actuary, then the actuary should recommend that such an assessment be performed. This appendix uses the framework of ASOP 51 to communicate important information about: significant risks to the Plan, the Plan’s maturity, and relevant historical Plan data. 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. 27 Maturity Risk • Definition: This is the potential for total plan liabilities to become more heavily weighted toward inactive liabilities over time. • Identification: The Plan is subject to maturity risk because as Plan assets and liabilities continue to grow, the impact of any gains or losses on the assets or liabilities also becomes larger. • Assessment: Currently assets are equal to 20 times last year’s contributions indicating a one-year asset loss of 10% would be equal to 2.0 times last year’s contributions. Retirement Risk • Definition: This is the potential for participants to retire and receive subsidized benefits more valuable than expected. • Identification: This plan has valuable early retirement benefits. If participants retire at earlier ages than anticipated by the actuarial assumptions, it is expected that additional funding will be required. Investment Risk • Definition: The potential that investment returns will be different than expected. • Identification: To the extent that actual investment returns differ from the assumed investment return, the plan’s future assets, funding contributions and funded status may differ significantly from those presented in this valuation. Interest Rate Risk • Definition: The potential that interest rates will be different than expected. • Identification: The pension liabilities reported herein have been calculated by computing the present value of expected future benefit payments using the interest rate(s) described in the appendix. If interest rate(s) in future valuations are different from those used in this valuation, future pension liabilities, funding contributions and funded status may differ significantly from those presented in this valuation. As a general rule, using a higher interest rate to compute the present value of future benefit payments will result in a lower pension liability, and vice versa. One aspect that can be used to estimate the impact of different interest rates is the plan’s duration. • Assessment: If the interest rate changes by 1%, the estimated percentage change in pension liability is approximately 10%. Demographic Risks • Definition: The potential that mortality or other demographic experience will be different than expected. • Identification: The pension liabilities reported herein have been calculated by assuming that participants will follow patterns of demographic experience (e.g. mortality, withdrawal, disability, retirement, form of payment election, etc.) as described in the appendix. If actual demographic experience or future demographic assumptions are different from what is assumed to occur in this valuation, future pension liabilities, funding contributions and funded status may differ significantly from those presented in this valuation. Metropolitan St. Louis Sewer District Employees' Pension Plan Valuation Date 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 Active Members 689 647 605 571 524 Postponed Retirees 21 18 21 24 21 Terminated Vested Members 180 175 174 178 181 Retired Members 534 556 575 579 608 Disabled Members 22 20 21 21 21 Beneficiaries 104 115 121 122 119 Total 1,550 1,531 1,517 1,495 1,474 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. 0 200 400 600 800 1,000 1,200 1,400 1,600 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018ParticipantsMember 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 12/31/2014 $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 12/31/2018 $260,560,576 $276,771,846 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 $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 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 Total Assets Market Value Actuarial Value Metropolitan St. Louis Sewer District Employees' Pension Plan Valuation Date Market Value Actuarial Value 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% 12/31/2018 -4.7%3.8% 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. -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 Rate of Return (%) on Total Assets Market Value Actuarial Value Metropolitan St. Louis Sewer District Employees' Pension Plan Valuation Date AVA/AAL 12/31/2014 87.4% 12/31/2015 87.5% 12/31/2016 82.0% 12/31/2017 83.1% 12/31/2018 82.6% 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. 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 Funded Ratio: Actuarial Value of Assets (AVA) vs. Actuarial Accrued Liability (AAL) Metropolitan St. Louis Sewer District Employees' Pension Plan Valuation Date Normal Cost 12/31/2014 $5,253,091 12/31/2015 $5,106,625 12/31/2016 $5,157,148 12/31/2017 $5,238,812 12/31/2018 $4,902,474 32 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 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 Normal Cost Metropolitan St. Louis Sewer District Employees' Pension Plan Valuation Recommended Date Contribution 12/31/2014 $10,059,004 12/31/2015 $10,145,562 12/31/2016 $12,328,093 12/31/2017 $12,493,916 12/31/2018 $12,725,462 33 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 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 Recommended Contribution