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HomeMy Public PortalAbout070_GMA Segal Report City of Tybee Island Retirement Plan A Participating Member of the Georgia Municipal Employees Benefit System Actuarial Valuation and Review as of January 1, 2011 The Burgess Building 201 Pryor Street, SW Copyright © 2011 Atlanta, GA 30303-3606 THE SEGAL GROUP, INC., 404-688-0472 THE PARENT OF THE SEGAL COMPANY Toll-Free within Georgia: ALL RIGHTS RESERVED 1-888-488-4462 The Segal Company 2018 Powers Ferry, Suite 850, Atlanta, GA 30339-7200 T 678.306.3100 F 678.306.3190 www.segalco.com February 10, 2011 GMEBS Retirement Fund Member: We are pleased to submit this Actuarial Valuation and Review as of January 1, 2011. It summarizes the actuarial data used in the valuation, establishes the funding requirements for the Plan and analyzes the preceding year’s experience. This report was based on the census data submitted to the Georgia Municipal Employees’ Benefit System (GMEBS), the financial information prepared by GMEBS, and the terms of the Plan. The actuarial calculations were completed under the supervision of Jeanette R. Cooper, FSA, FCA, MAAA, Enrolled Actuary. This actuarial valuation has been completed in accordance with generally accepted actuarial principles and practices. To the best of our knowledge, the information supplied in this actuarial valuation is complete and accurate. Further, in our opinion, the assumptions as approved by the GMEBS Board of Trustees are reasonably related to the experience of and the expectations for the Plan. The table of contents, which can be found in front of the first tab, explains where to find specific information in the report. Section 1 provides a summary of the valuation results as well as a comparison to the previous valuation. The new cost of the plan as referenced in Section 1, including administrative charges and personalized pension statements, will begin to be invoiced by GMA with your next fiscal year. Personalized pension statements will be forwarded to you by GMA separately. Please contact the following GMA staff if you have any questions. GMA staff can also be reached toll-free at 1-888-488-4462. 􀃡 Invoice questions -Judy Kelley, Accounting Services Manager 678-686-6237, or Joel Levy, Accounting Technician 678-686-6233. 􀃡 Pension statements -Janet Bowman 678-686-6218. 􀃡 Valuation/Funding questions -Linda Gady, Manager of Employee Benefit Services 678-686-6222. THE SEGAL COMPANY By: ____________________________ ____________________________ Leon F. (Rocky) Joyner, Jr., FCA, ASA, MAAA, EA Jeanette R. Cooper, FSA, FCA, MAAA, EA Vice President and Actuary Vice President and Actuary VALUATION SUMMARY VALUATION RESULTS SUPPLEMENTARY INFORMATION REPORTING INFORMATION Purpose .......................................... i Significant Issues in Valuation Year.......................... ................ i Summary of Key Valuation Results..................................... ii A. Participant Data....................... 1 B. Financial Information.............. 4 C. Actuarial Experience............... 7 D. Recommended Contribution ... 8 E. Funded Status........................ 10 EXHIBIT A Table of Plan Coverage as of Valuation Date ................................ 13 EXHIBIT B Participants in Active Service as of Valuation Date ................................ 14 EXHIBIT C Development of Unfunded/(Surplus) Actuarial Accrued Liability............. 15 EXHIBIT D Definitions of Pension Terms .......... 16 EXHIBIT I Summary of Actuarial Valuation Results.............................................18 EXHIBIT II Supplementary Information Required by the GASB – Schedule of Funding Progress ...........................................20 EXHIBIT III Supplementary Information Required by the GASB ...................................21 EXHIBIT IV Actuarial Assumptions and Actuarial Cost Method ....................................22 EXHIBIT V Summary of Plan Provisions............25 SECTION 1 SECTION 2 SECTION 3 SECTION 4 SECTION 1: Valuation Summary for the City of Tybee Island Retirement Plan i Purpose This report has been prepared by The Segal Company to present a valuation of the City of Tybee Island Retirement Plan as of January 1, 2011. The valuation was performed to determine whether the assets and contributions are sufficient to provide the prescribed benefits. The contribution requirements presented in this report are based on: 􀃡 The benefit provisions of the Retirement Plan; 􀃡 The characteristics of covered active participants, inactive vested participants, and retired participants and beneficiaries; 􀃡 The assets of the Plan; 􀃡 Economic assumptions regarding future salary increases and investment earnings; and 􀃡 Other actuarial assumptions, regarding employee terminations, retirement, death, etc. Significant Issues in Valuation Year 􀃡 The recommended contribution for the plan for the coming fiscal year, including plan changes, administrative charges and pension statements has increased from $432,899 to $445,399. The new contribution represents 15.32% of the expected payroll of covered employees, versus 14.44% at the previous valuation. This is an increase of 0.88% of pay. 􀃡 Payment of the above recommended contribution will begin with your next fiscal year starting on July 1, 2011. 􀃡 The valuation date was changed from July 1 to January 1. There were no other changes in plan provisions, methods, or assumptions in this valuation. 􀃡 The Segal Company does not perform an in-depth analysis into the cause of contribution fluctuations for GMEBS plans unless the change is more than 2.00% of payroll. Over the long-term, some fluctuation is expected. 􀃡 Due to the long-term nature of retirement plans, the valuation utilizes an asset smoothing method to allow fluctuations in the market value of assets to be recognized over a number of years rather than immediately. This prevents any one year from overly impacting the valuation and allows plan sponsors to prepare for potential changes in the contribution requirements. For illustrative purposes only, if valuation assets had been reset to market value, the Plan’s funded ratio would have been 66.86% and the recommended contribution $500,442. This compares to the actual valuation results of 74.55% and $445,399, respectively. SECTION 1: Valuation Summary for the City of Tybee Island Retirement Plan ii Summary of Key Valuation Results Valuation date Fiscal year-beginning date January 1, 2011 July 1, 2011 July 1, 2010 January 1, 2011 Contributions for fiscal year beginning: Recommended $445,399 $432,899 Recommended as a percent of expected payroll 15.32% 14.44% Funding elements as of the valuation date: Mid-year normal cost, including administrative expenses $226,021 $215,564 Market value of assets 3,757,376 3,635,626 Actuarial value of assets 4,189,682 4,015,133 Actuarial accrued liability 5,620,138 5,434,428 Unfunded/(Surplus) actuarial accrued liability 1,430,456 1,419,295 Funded ratio 74.55% 73.88% Funded Status as of valuation date: Present value of accrued plan benefits on funding assumptions $5,169,270 $4,879,363 Funded percentage relative to market value 72.69% 74.51% Present value of accrued plan benefits on a plan termination basis $10,126,412 $8,685,817 Funded percentage relative to market value 37.10% 41.86% Demographic data as of valuation date: Number of retired participants and beneficiaries 31 29 Number of vested former participants 33 32 Number of active employees 73 74 Number of active elected officials 6 4 Total valuation payroll $2,856,841 $2,946,562 Average valuation payroll 39,135 39,818 SECTION 2: Valuation Results for the City of Tybee Island Retirement Plan 1 The Actuarial Valuation and Review considers the number and demographics of covered participants, including active participants, vested terminated participants, retired participants and beneficiaries. This section presents a summary of significant statistical data on these participant groups. More detailed information for this valuation year and the preceding valuation can be found in Section 3, Exhibits A and B. A. PARTICIPANT DATA A historical perspective of how the participant population has changed over past valuations can be seen in this chart. CHART 1 Participant Population: 2004 – 2010 Year Ended Active Participants Vested Terminated Participants Retired Participants and Beneficiaries Ratio of Non-Actives to Actives April 30, 2004 58 21 17 0.66 April 30, 2005 58 24 20 0.76 April 30, 2006 59 28 20 0.81 April 30, 2007 54 30 23 0.98 April 30, 2008 64 33 25 0.91 April 30, 2009 72 33 26 0.82 June 30, 2010 78 32 29 0.78 December 31, 2010 79 33 31 0.81 SECTION 2: Valuation Results for the City of Tybee Island Retirement Plan 2 02468 10 12 14Under 25 25 -29 30 -34 35 -39 40 -44 45 -49 50 -54 55 -59 60 -64 65 -69 70 & over 05 10 15 20 25 30 35 40 45 50 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40 & over Active Participants Plan costs are affected by the age, years of service and payroll of active participants. In this year’s valuation, there were 79 active participants with an average age of 45.7, average years of service of 7.4 years and average payroll of $39,135. The 78 active participants in the prior valuation had an average age of 44.0, average service of 7.9 years and average payroll of $39,818. (Payroll is provided for employees only, and not for elected officials, when applicable.) Inactive Participants In this year’s valuation, there were 33 participants with a vested right to a deferred or immediate vested benefit. These graphs show a distribution of active participants by age and by years of benefit service. CHART 2 Distribution of Active Participants by Age as of December 31, 2010 CHART 3 Distribution of Active Participants by Years of Benefit Service as of December 31, 2010 SECTION 2: Valuation Results for the City of Tybee Island Retirement Plan 3 0123456789 10 Under 4545 -4950 -5455 -5960 -6465 -6970 -7475 -7980 -8485 -89 90 & over Beneficiaries Retirees Retired Participants and Beneficiaries As of December 31, 2010, 25 retired participants and 6 beneficiaries were receiving total monthly benefits of $21,471. For comparison, in the previous valuation, there were 23 retired participants and 6 beneficiaries receiving total monthly benefits of $17,235. These graphs show a distribution of the current retired participants and beneficiaries based on their age, by type of pension. CHART 4 Distribution of Retired Participants and Beneficiaries by Type and by Age as of December 31, 2010 SECTION 2: Valuation Results for the City of Tybee Island Retirement Plan 4 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.64/30/2005 4/30/2006 4/30/2007 4/30/2008 4/30/2009 6/30/2010* 12/31/2010 $ Millions Adjustment toward market value Benefits and expenses paid Investment income Contributions Retirement plan funding anticipates that, over the long term, both contributions and investment earnings will be needed to cover benefit payments and expenses. Retirement plan assets change as a result of the net impact of these income and expense components. B. FINANCIAL INFORMATION The chart depicts the components of changes in the actuarial value of assets over prior years. Note: The first bar represents increases in assets during each year while the second bar details the decreases. CHART 5 Comparison of Increases and Decreases in the Actuarial Value of Assets for Years Ended April 30, 2005 – December 31, 2010 * Adjustment toward market value includes asset method change. SECTION 2: Valuation Results for the City of Tybee Island Retirement Plan 5 Actuarial Value of Assets It is desirable to have level and predictable plan costs from one year to the next. For this reason, the GMEBS Board of Trustees approved an asset valuation method that gradually adjusts to market value. Under this valuation method, the full value of market fluctuations is not recognized in a single year and, as a result, the asset value and the plan costs are more stable. The amount of the adjustment to recognize market value is treated as income, which may be positive or negative. Realized and unrealized gains and losses are treated equally and, therefore, the sale of assets has no immediate effect on the actuarial value. The chart shows the determination of the actuarial value of assets as of the valuation date. CHART 6 Determination of Actuarial Value of Assets for Year Ended December 31, 2010 1. Market value as of July 1, 2010 $3,635,626 2. Contributions 182,030 3. Disbursements -116,307 4. Investment return 56,027 5. Market value as of January 1, 2011 $3,757,376 6. Actuarial value as of July 1, 2010 $4,015,133 7. Contributions 182,030 8. Disbursements -116,307 9. Assumed interest equal to valuation rate 156,860 10. Expected actuarial value as of January 1, 2011 4,237,716 11. Adjustment for difference between expected actuarial value and market value as of January 1, 2011 -48,034 12. Preliminary actuarial value of assets as of January 1, 2011 4,189,682 13. Adjustment due to corridor (62%-138% of market value of assets) on actuarial value of assets 0 14. Actuarial value of assets as of January 1, 2011 4,189,682 SECTION 2: Valuation Results for the City of Tybee Island Retirement Plan 6 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 4/30/2004 4/30/2005 4/30/2006 4/30/2007 4/30/2008 4/30/2009 6/30/2010* 12/31/2010 $ Millions Actuarial Value Market Value Asset History Both the actuarial value and market value of assets are representations of the Plan’s financial status. As investment gains and losses are gradually taken into account, the actuarial value of assets tracks the market value of assets. The actuarial asset value is significant because the Plan’s liabilities are compared to its assets to determine what portion, if any, remains unfunded. Amortization of the unfunded liability is an important element in determining the contribution requirement. This chart shows the change in the actuarial value of assets versus the market value over the prior years. CHART 7 Actuarial Value of Assets vs. Market Value of Assets for Years Ended April 30, 2004 – December 31, 2010 * Includes asset method change. SECTION 2: Valuation Results for the City of Tybee Island Retirement Plan 7 To calculate the required contribution, assumptions are made about future events that affect the amount and timing of benefits to be paid and assets to be accumulated. Each year actual experience is measured against the assumptions. If overall experience is more favorable than anticipated (an actuarial gain), the contribution requirement will decrease from the previous year. On the other hand, the contribution requirement will increase if overall actuarial experience is less favorable than expected (an actuarial loss). Taking account of experience gains or losses in one year without making a change in assumptions reflects the belief that the single year’s experience was a short-term development and that, over the long term, experience will return to the original assumptions. For contribution requirements to remain stable, assumptions should approximate experience. If assumptions are changed, the contribution requirement is adjusted to take into account a change in experience anticipated for all future years. There are differences between the expected and the actual experience that appear when the new valuation is compared with the projections from the previous valuation. These include: 􀃡 net investment return, 􀃡 administrative expenses, 􀃡 the extent of turnover among the participants, 􀃡 retirement experience (earlier or later than expected), 􀃡 mortality (more or fewer deaths than expected), 􀃡 the number of disability retirements, and 􀃡 salary increases different than assumed. C. ACTUARIAL EXPERIENCE SECTION 2: Valuation Results for the City of Tybee Island Retirement Plan 8 The GMEBS Board of Trustees has adopted an actuarial funding policy for determination of annual contributions and the systematic funding of liabilities arising under the Plan. The annual minimum contribution is the sum of 1) the normal cost (including administrative expenses), 2) the closed level dollar amortization of the unfunded actuarial accrued liability over a period that ranges from 10 to 30 years based on the funding policy adopted by the GMEBS Board of Trustees, and 3) interest on these amounts from the valuation date to the date contributions are paid (assumed monthly). D. RECOMMENDED CONTRIBUTION CHART 8 Recommended Contribution Year Beginning January 1, 2011 July 1, 2010 1. Total benefit normal cost $207,847 $197,711 2. Administrative expenses 18,174 17,853 3. Expected employee contributions 0 0 4. Employer normal cost: (1) + (2) + (3) $226,021 $215,564 5. Actuarial accrued liability at valuation date $5,620,138 $5,434,428 6. Actuarial value of assets at valuation date 4,189,682 4,015,133 7. Unfunded/(surplus) actuarial accrued liability: (5) – (6) $1,430,456 $1,419,295 8. Payment on unfunded/(surplus) actuarial accrued liability 203,061 201,476 9. Full funding credit 0 0 10. Recommended mid-year contribution at valuation date: (4) + (8) + (9) $429,082 $417,040 11. Adjustment to fiscal year* 16,317 15,859 12. Total recommended mid-year contribution, for fiscal year $445,399 $432,899 13. Recommended contribution as a percentage of expected payroll 15.32% 14.44% * Fiscal year begins July 1, 2011. Last year the fiscal year began January 1. The chart compares this valuation’s recommended contribution with the prior valuation. SECTION 2: Valuation Results for the City of Tybee Island Retirement Plan 9 Well-funded plans may have a full funding credit applied to reduce the recommended contributions. This credit insures that contributions are not required if a plan’s assets exceed the present value of future benefits. In a year when the full funding credit applies, the prior year amortization bases are eliminated. The annual recommended contribution is the greater of 1) the minimum contribution described above and 2) normal cost (including administrative expenses) with interest, adjusted by a full funding credit to insure that contributions are not required if a plan’s assets exceed the present value of future benefits. State Funding Standards The Plan is subject to minimum funding standards of the Public Retirement Systems Standards Law (Georgia Code Section 47-20-10). The estimated minimum annual contribution under these standards is $321,343. This minimum contribution has been determined as the sum of 1) the normal cost (including administrative expenses), 2) the 30-year level percentage of payroll amortization of the unfunded actuarial accrued liability or the 10-year level percentage of payroll amortization of the surplus, and 3) interest on these amounts from the valuation date to the date contributions are paid (assumed monthly). The GMEBS Board of Trustees has adopted an actuarial funding policy that requires a different funding level than the estimated minimum annual contribution to minimize fluctuations in annual contribution amounts and to accumulate sufficient funds to secure benefits under the Plan. If the employer contributes the recommended contribution developed under the actuarial funding policy each year, the Plan will meet applicable state funding standards. SECTION 2: Valuation Results for the City of Tybee Island Retirement Plan 10 The funded status measures the ability of the Plan (through assets in the trust) to pay benefits earned by participants. The funded status percentage is the ratio of the market value of assets to the present value of plan benefits as of the valuation date. A year-by-year comparison of the funded status percentages indicates the plan’s progress in securing participants’ benefits. Different techniques are used to gauge a plan’s funded status; two customary measures are presented in this section. Present Value of Accrued Plan Benefits Basis A comparison of the market value of assets to the present value of accrued plan benefits provides one measure of the funded status of the plan. The present value of accrued plan benefits represents the benefits earned by plan participants based on their salary and service history as of the valuation date. The calculation of these present values assumes the retirement plan continues on an ongoing basis without recognizing benefit increases from future service or salary adjustments. The actuarial funding policy establishes a target level of 125% to 150% for mature plans. Since ultimate benefits under the plan are related to higher final pay levels for participants, a prudent funding objective exceeds 100% of the present value of benefits based on current salary levels. E. FUNDED STATUS CHART 9 Funded Status – On-going Plan Basis As of Valuation Date January 1, 2011 July 1, 2010 Present value of accrued plan benefits $5,169,270 $4,879,363 Market value of assets 3,757,376 3,635,626 Funded percentage 72.69% 74.51% SECTION 2: Valuation Results for the City of Tybee Island Retirement Plan 11 Plan Termination Basis Another measure of the funded status of the plan gauges the sufficiency of the plan assets to cover liabilities in the event of a plan termination. The value of benefits on a plan termination basis differs from the ongoing plan basis calculation in the interest assumption for the present values. Lump sum distributions to participants use an interest rate specified by the Plan, which is adjusted each January 1. Since prescribed interest rates produce significantly higher distribution amounts, the funded percentage on the plan termination basis is typically lower than on an ongoing plan basis. A funded percentage of 100% or more indicates each participant would receive a full distribution of his or her accrued benefit in the event of termination. Lower funded percentages would require the allocation of the assets (in accordance with the plan’s terms), yielding less than full distributions for some participants. participants. CHART 10 Funded Status – Plan Termination Basis As of Valuation Date January 1, 2011 July 1, 2010 Lump sum present values $10,126,412 $8,685,817 Market value of assets 3,757,376 3,635,626 Funded percentage 37.10% 41.86% SECTION 2: Valuation Results for the City of Tybee Island Retirement Plan 12 Summary of Funded Status The following chart compares the present value of accrued plan benefits under both an ongoing plan basis and a plan termination basis. CHART 11 Present Value of Accrued Plan Benefits as of Valuation Date Number of Participants On-going Basis Plan Termination Basis Benefits for retired participants and beneficiaries 31 $3,037,358 $5,101,113 Terminated vested participants 33 451,021 1,074,607 Active vested participants 36 1,370,306 3,142,558 Total present value of vested benefits 100 $4,858,685 $9,318,278 Nonvested benefits 43 310,585 808,134 Total present value of accrued plan benefits 143 $5,169,270 $10,126,412 Market value of assets 3,757,376 3,757,376 Unfunded/(Surplus) present value of accrued plan benefits 1,411,894 6,369,036 Funded percentage 72.69% 37.10% SECTION 3: Supplemental Information for the City of Tybee Island Retirement Plan 13 EXHIBIT A Table of Plan Coverage as of Valuation Date For Valuation as of Category January 1, 2011 July 1, 2010 Change From Prior Year Active participants in valuation Number of employees 73 74 -1.4% Number of elected officials 6 4 50.0% Average age 45.7 44.0 N/A Average service 7.4 7.9 N/A Total valuation payroll $2,856,841 $2,946,562 -3.0% Average valuation payroll 39,135 39,818 -1.7% Account balances N/A N/A N/A Total active vested participants 36 39 -7.7% Vested terminated participants 33 32 3.1% Retired participants Number in pay status 24 22 9.1% Average age 70.2 71.1 N/A Average monthly benefit $727 $601 21.0% Disabled participants Number in pay status 1 1 0.0% Average age 63.0 62.0 N/A Average monthly benefit $831 $831 0.0% Beneficiaries 6 6 0.0% SECTION 3: Supplemental Information for the City of Tybee Island Retirement Plan 14 EXHIBIT B Participants in Active Service as of Valuation Date By Age, Years of Service, and Average Valuation Payroll Years of Service Age Total 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40 & over Under 25 3 3 ----------------$26,520 $26,520 ----------------25 -29 10 8 2 --------------$30,866 $31,008 $30,296 --------------30 -34 6 4 --2 ------------$38,840 $35,718 --$45,084 ------------35 -39 8 4 1 1 2 ----------$42,952 $39,951 --$46,218 $47,321 ----------40 -44 6 2 2 --2 ----------$40,330 $29,370 $45,996 --$45,625 ----------45 -49 13 7 3 1 --1 1 ------$40,056 $37,573 $39,271 $50,960 --$44,866 $44,076 ------50 -54 12 7 3 ----1 1 ------$45,231 $43,425 $46,729 ----$41,954 $54,847 ------55 -59 10 4 2 1 1 2 --------$41,579 $38,940 $40,935 $52,273 $36,390 $44,428 --------60 -64 9 4 2 --3 ----------$38,148 $31,059 $43,031 --$43,610 ----------65 -69 2 1 ----1 ----------$33,426 ------$33,426 ----------70 & over -----------------------------------------Total 79 44 15 5 9 4 2 ------$39,135 $35,647 $41,213 $47,924 $42,949 $43,919 $49,462 $0 $0 $0 SECTION 3: Supplemental Information for the City of Tybee Island Retirement Plan 15 EXHIBIT C Development of Unfunded/(Surplus) Actuarial Accrued Liability Year Ended December 31, 2010 1. Unfunded/(Surplus) actuarial accrued liability at beginning of year $1,419,295 2. Normal cost at beginning of year 103,833 3. Total contributions -182,030 4. Interest (a) For 6 months on (1) + (2) $59,021 (b) For 3 months on (3) -3,527 (c) Total interest 55,494 5. Expected unfunded actuarial accrued liability $1,396,592 6. Changes due to: (a) (Gain)/Loss $33,864 (b) Assumptions --(c) Funding/Asset method --(d) Plan provisions --(e) Total changes 33,864 7. Unfunded/(Surplus) actuarial accrued liability at end of year $1,430,456 SECTION 3: Supplemental Information for the City of Tybee Island Retirement Plan 16 The following list defines certain technical terms for the convenience of the reader: Assumptions or Actuarial Assumptions: The estimates on which the cost of the Plan is calculated including: (a) Investment return — the rate of investment yield which the Plan will earn over the long-term future; (b) Mortality rates — the death rates of employees and pensioners; life expectancy is based on these rates; (c) Retirement rates — the rate or probability of retirement at a given age; (d) Turnover rates — the rates at which employees of various ages are expected to leave employment for reasons other than death, disability, or retirement. Normal Cost: The amount of contributions required to fund the benefit allocated to the current year of service. Actuarial Accrued Liability For Actives: The equivalent of the accumulated normal costs allocated to the years before the valuation date. Actuarial Accrued Liability For Pensioners: The single sum value of lifetime benefits to existing pensioners. This sum takes account of life expectancies appropriate to the ages of the pensioners and of the interest which the sum is expected to earn before it is entirely paid out in benefits. Unfunded Actuarial Accrued Liability: The extent to which the actuarial accrued liability of the Plan exceeds the assets of the Plan. There is a wide range of approaches to paying off the unfunded actuarial accrued liability, from meeting the interest accrual only to amortizing it over a specific period of time. EXHIBIT D Definitions of Pension Terms SECTION 3: Supplemental Information for the City of Tybee Island Retirement Plan 17 Amortization of the Unfunded Actuarial Accrued Liability: Payments made over a period of years equal in value to the Plan’s unfunded actuarial accrued liability. Investment Return: The rate of earnings of the Plan from its investments, including interest, dividends and capital gain and loss adjustments, computed as a percentage of the average value of the fund. For actuarial purposes, the investment return often reflects a smoothing of the capital gains and losses to avoid significant swings in the value of assets from one year to the next. Full Funding Credit: The excess of the recommended contribution determined without regard to the full funding limitation over the full funding limit (the present value of future benefits plus administrative expenses less the market value of assets, minimum of the normal cost for administrative expenses). Minimum Contribution: The normal cost plus an amount to fully amortize the unfunded actuarial accrued liability over a specified number of years (in a similar manner as monthly payments of principal and interest reduce the outstanding balance of a mortgage). Recommended Contribution: The normal cost (including administrative expenses) plus the amortization of the unfunded actuarial accrued liability but not less than the minimum contribution. Valuation Payroll: Annual reported salaries for all active participants on the valuation date, actuarially adjusted. Recommended Contributions as a Percentage of Payroll: The ratio of the annual contribution to covered payroll. In future valuations, this percentage should remain relatively stable (in the absence of changes to the plan provisions or to the actuarial assumptions or methods). As the dollar amount of annual payroll increases or decreases, the recommended contribution is expected to adjust in a like manner. Experience of the plan which differs materially from that expected by the actuarial assumptions will also change the percentage of payroll over time. SECTION 4: Reporting Information for the City of Tybee Island Retirement Plan 18 EXHIBIT I Summary of Actuarial Valuation Results The valuation was made with respect to the following data supplied to us: 1. Pensioners as of the valuation date (including 6 beneficiaries) 31 2. Participants inactive during year ended December 31, 2010 with vested rights 33 3. Participants active during the year ended December 31, 2010 (including 6 elected officials) 79 Fully vested 24 Partially vested 12 Not vested 43 The actuarial factors as of the valuation date are as follows: 1. Normal cost, including administrative expenses $226,021 2. Present value of future benefits 7,514,441 3. Actuarial accrued liability 5,620,138 Pensioners and beneficiaries $3,037,358 Inactive participants with vested rights 451,021 Active participants 2,131,759 4. Actuarial value of assets ($3,757,376 at market value) 4,189,682 5. Unfunded/(Surplus) actuarial accrued liability 1,430,456 SECTION 4: Reporting Information for the City of Tybee Island Retirement Plan 19 EXHIBIT I (continued) Summary of Actuarial Valuation Results The determination of the recommended contribution is as follows: 1. Total benefit normal cost $207,847 2. Administrative expenses 18,174 3. Expected employee contributions 0 4. Employer normal cost: (1) + (2) + (3) 226,021 5. Payment on unfunded/(surplus) actuarial accrued liability 203,061 6. Full funding credit 0 7. Recommended mid-year contribution at valuation date: (4) + (5) + (6) $429,082 8. Adjustment to fiscal year* 16,317 9. Total recommended mid-year contribution, for fiscal year $445,399 10. Total recommended contribution as a percentage of expected payroll 15.32% * Fiscal year begins July 1, 2011. SECTION 4: Reporting Information for the City of Tybee Island Retirement Plan 20 EXHIBIT II Supplementary Information Required by the GASB – Schedule of Funding Progress Actuarial Valuation Date Actuarial Value of Assets (a) Actuarial Accrued Liability (AAL) (b) Unfunded/(Surplus) AAL (UAAL) (b) -(a) Funded Ratio (a) /(b) Covered Payroll (c) UAAL as a Percentage of Covered Payroll* [(b) -(a)] /(c) 05/01/2006 $2,820,445 $3,810,009 $989,564 74.03% $2,109,394 46.91% 05/01/2007 3,182,033 4,157,135 975,102 76.54% 2,006,483 48.60% 05/01/2008 3,536,139 4,627,567 1,091,428 76.41% 2,411,627 45.26% 05/01/2009 2,805,362 4,941,486 2,136,124 56.77% 2,711,811 78.77% 07/01/2010 4,015,133 5,434,428 1,419,295 73.88% 2,946,562 48.17% 01/01/2011 4,189,682 5,620,138 1,430,456 74.55% 2,856,841 50.07% * Not less than zero SECTION 4: Reporting Information for the City of Tybee Island Retirement Plan 21 EXHIBIT III Supplementary Information Required by the GASB Valuation Date January 1, 2011 Actuarial Cost Method Projected Unit Credit Amortization Method Closed level dollar for remaining unfunded liability Remaining Amortization Period Remaining amortization period varies for the bases, with a net effective amortization period of 10 years Asset Valuation Method Sum of actuarial value at beginning of year and the cash flow during the year plus the assumed investment return, adjusted by 10% of the amount that the value exceeds or is less than the market value at end of year. The actuarial value is adjusted, if necessary, to be within 50% of market value for 2009, 44% of market value for 2010, 38% of market value for 2011, 32% of market value for 2012, 26% of market value for 2013, and 20% of market value for 2014 and later years. Actuarial Assumptions: Net Investment Rate of Return 7.75% Projected Salary Increases 3.50% plus age age and service based merit increases Cost of Living Adjustments 3.00% Membership of the Plan Retirees and beneficiaries 31 Terminated plan members entitled to, but not yet receiving benefits 33 Active plan members 79 Total 143 SECTION 4: Reporting Information for the City of Tybee Island Retirement Plan 22 EXHIBIT IV Actuarial Assumptions and Actuarial Cost Method Mortality Rates: Healthy: RP-2000 Combined Healthy Mortality Table with sex-distinct rates, set forward two years for males and one year for females Disabled: RP-2000 Disabled Retiree Mortality Table with sex-distinct rates, set forward two years for males and one year for females Plan termination basis (all lives): 1994 Group Annuity Reserving Unisex Table Termination Rates before Retirement: Rate (%) Age Male Mortality Female Mortality Male Disability Female Disability Turnover 20 0.04 0.02 0.06 0.04 25.80 25 0.04 0.02 0.06 0.05 19.80 30 0.06 0.03 0.06 0.06 15.60 35 0.09 0.05 0.06 0.06 12.15 40 0.12 0.08 0.14 0.08 9.45 45 0.17 0.12 0.22 0.11 7.80 50 0.27 0.19 0.34 0.17 5.85 55 0.47 0.31 0.49 0.36 3.30 60 0.88 0.58 0.66 0.57 0.00 Retirement Rates: Age Retirement Probability Employees 65 with 5 years of service 100% Police Earlier of 65 with 5 years of service and 60 with 20 years of service 100% Officials 65 100% SECTION 4: Reporting Information for the City of Tybee Island Retirement Plan 23 Retirement Age for Inactive Vested Participants: 65 Form of Payment Life Annuity Unknown Data for Participants: Same as those exhibited by Participants with similar known characteristics. If not specified, Participants are assumed to be male. Eligibility Requirement: Employees: 1 year Officials: No waiting period Percent Married: 100% Age of Spouse: Females three years younger than males. Net Investment Return: 7.75% On-going basis 3.80% Plan termination basis (30-year treasury securities rate as of August, 2010, published in September, 2010; 4.37% last year) Salary Increases: 11% for the first year of service, 7% for the second year of service, 6.5% for the third year of service, 6.25% for the fourth year of service, and 6% for the fifth year of service. For subsequent years, increases follow the following table of rates: Age Rate (%) 20 6.00 25 6.00 30 5.67 35 5.33 40 5.00 45 4.83 50 4.67 55 4.50 60 4.00 Note the above rates include inflation of 3.50%. Social Security Wage Base Increase: 3.50% SECTION 4: Reporting Information for the City of Tybee Island Retirement Plan 24 Inflation: 3.50% Cost of Living Adjustment: 3.00% Administrative Expenses: $7,000 plus $65 per participant plus 0.05% of the market value of assets. Actuarial Value of Assets: Sum of the actuarial value at the beginning of year and the cash flow during year plus the assumed investment return, adjusted by 10 percent of the amount that the value exceeds or is less than the market value at end of year. The actuarial value is adjusted, if necessary, to be within 50% of market value of 2009, 44% of market value for 2010, 38% of market value for 2011, 32% of market value for 2012, 26% of market value for 2013, and 20% of market value for 2014 and later years. Actuarial Cost Method: Projected Unit Credit Cost Method. Normal Cost and Actuarial Accrued Liability are calculated on an individual basis and are allocated by service. Amortization: The amortization of the unfunded actuarial accrued liability is level dollar over 30 years for the initial unfunded accrued liability, 15 years for actuarial gains and losses, 20 years for plan provisions and 30 years for actuarial assumptions and cost methods. The total amortization must be within a corridor of the 10-year and the 30-year amortization of the unfunded/(surplus) actuarial accrued liability. In a year when the 10-year or 30-year corridor applies, the following year, the prior year bases are combined into one 10-year or 30-year base. Asset Data: GMEBS has supplied all asset data used in the valuation. The market value of assets is based on current values as of three months preceding the valuation date (September 30, 2010) and is assumed to be current through that date. Participant Data: The primary source of participant data for the current valuation is a census of all participants which was prepared by the employer through GMEBS. The data is typically collected four months prior to the valuation date and assumed to be current through that date. Changes in Methods and Assumptions: The valuation date was changed from July 1 to January 1. There were no other changes in methods or assumptions from the prior valuation. SECTION 4: Reporting Information for the City of Tybee Island Retirement Plan 25 EXHIBIT V Summary of Plan Provisions EMPLOYER City of Tybee Island SOCIAL SECURITY Yes PARTICIPANT CONTRIBUTIONS Noncontributory ORIGINAL EFFECTIVE DATE Employees: 5-1-87 Officials: 7-1-03 MASTER PLAN/ADOPTION AGREEMENT 7-1-03 ELIGIBILITY REQUIREMENTS Employees: 1 year (20 hours) employees hired before 10-10-96 (35 hours) employees hired or rehired on or after 10-10-96 Officials: 7-1-03 optional participation City Manager’s participation is optional (see AA for details) NORMAL RETIREMENT AGE Employees: 65+5 (alternate 55+20 for police officers – participant is not required to be in service of the employer to qualify for the alternative). Officials: 65 EARLY RETIREMENT 55+10 DATE INDEXED 5-1-87 BENEFIT FORMULA 1.5%-2.0% -dynamic breakpoint; terminations on or after 2-1-02 1.25%-2.0% -dynamic breakpoint terminations prior to 2-1-02 SECTION 4: Reporting Information for the City of Tybee Island Retirement Plan 26 OFFICIALS’ BENEFIT $20 Monthly benefit cannot exceed 100% of the monthly salary the official was receiving prior to retirement; 2011 – Mayor $500, council $200 VESTING Employees -50% after 5 years, 60% after 6 years, 70% after 7 years, 80% after 8 years, 90% after 9 years, 100% after 10 years Officials – 4 years DEATH BENEFITS Actuarial Reserve (no 10-year add on) Term vested Auto A death benefit effective 7-1-03. DISABILITY MINIMUM 20% COST-OF-LIVING Variable not to exceed 3% (effective 6-1-99) SPECIAL JOB CLASS Class 1 = Police (alternate normal retirement date) OTHER Monthly benefit cannot exceed 100% of the highest monthly earnings that the participant received during the period used for calculating his final average earnings. No changes in plan features since last valuation. 7391526v1/07074.001 EXHIBIT V (continued) Summary of Plan Provisions