city of orlando police officers' pension fund

City of Orlando Police Officers' Pension Fund Actuarial Valuation and Review as of October 1, 2016

Copyright © 2017 by The Segal Group, Inc. All rights reserved.

2018 Powers Ferry Road, Suite 850 Atlanta, GA 30339 T 678.306.3100 www.segalco.com

March 15, 2017 Board of Trustees City of Orlando Police Officers' Pension Fund Orlando, FL

Dear Board Members:

We are pleased to submit this Actuarial Valuation and Review as of October 1, 2016. It summarizes the actuarial data used in the valuation, establishes the funding requirements for fiscal 2018 and analyzes the preceding year’s experience. The census information on which our calculations were based was prepared by the City’s Employee Benefits Department and the financial information was provided by the City’s Office of Business & Financial Services. That assistance is gratefully acknowledged.

Statement by Enrolled Actuary:

“This actuarial valuation and/or cost determination was prepared and completed by me, or under my direct supervision, and I acknowledge responsibility for the results. To the best of my knowledge, the results are complete and accurate, and in my opinion, the techniques and assumptions used are reasonable and meet the requirements and intent of part VII, Chapter 112, Florida Statutes. There is no benefit or expense to be provided by the plan and/or paid from the plan’s assets for which liabilities or current costs have not been established or otherwise taken into account in the valuation. All known events or trends which may require a material increase in plan costs or required contribution rates have been taken into account in the valuation.”

The measurements shown in this actuarial valuation may not be applicable for other purposes. 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); and changes in plan provisions or applicable law.

The actuarial calculations were directed under our supervision. We are members of the American Academy of Actuaries and we meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion herein.

We look forward to reviewing this report at your next meeting and to answering any questions.

Sincerely,

Segal Consulting, a Member of The Segal Group, Inc. By: ____________________________ ____________________________

Leon F. (Rocky) Joyner, Jr. Jeffrey S. Williams, FCA, ASA, MAAA Vice President and Consulting Actuary Vice President and Consulting Actuary

Enrolled Actuary No. 14-07009

SECTION 1 SECTION 2 SECTION 3 SECTION 4

VALUATION SUMMARY VALUATION RESULTS SUPPLEMENTAL INFORMATION REPORTING INFORMATION

Purpose ...................................... i Significant Issues in Valuation Year ........................................ i

Summary of Key Valuation Results .................................. iv

Important Information About Actuarial Valuations .............. v

A. Participant Data .................. 1 B. Financial Information ......... 4 C. Actuarial Experience .......... 7 D. Recommended

Contribution ..................... 12

EXHIBIT A Table of Plan Coverage ........... 14

EXHIBIT B Participants in Active Service as of September 30, 2016 ........ 15

EXHIBIT C Reconciliation of Participant Data ......................................... 16

EXHIBIT D Summary Statement of Income and Expenses on an Actuarial Value Basis ............................. 17

EXHIBIT E Summary Statement of Income and Expenses on a Market Value Basis ............................. 18

EXHIBIT F Summary Statement of Plan Assets ...................................... 19

EXHIBIT G Development of the Fund Through September 30, 2016 .. 20

EXHIBIT H Development of Unfunded Actuarial Accrued Liability for Year Ended September 30, 2016 ................. 21

EXHIBIT I Table of Amortization Bases ... 22

EXHIBIT J Definitions of Pension Terms .. 23

EXHIBIT K Supplementary State of Florida Information.............................. 25

EXHIBIT I Summary of Actuarial Valuation Results .............. 31

EXHIBIT II History of Employer Contributions ..................... 33

EXHIBIT III Schedule of Funding Progress ............................. 34

EXHIBIT IV Funded Ratio ..................... 35

EXHIBIT V Supplementary GASB Information - Analysis of Financial Experience ......... 36

EXHIBIT VI Actuarial Assumptions and Actuarial Cost Method ...... 39

EXHIBIT VII Summary of Plan Provisions .......................... 44

SECTION 1: Valuation Summary for the City of Orlando Police Officers' Pension Fund

i

Purpose This report has been prepared by Segal Consulting to present a valuation of the City of Orlando Police Officers' Pension Fund as of October 1, 2016. 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 Pension Plan, as administered by the Board;

The characteristics of covered active participants, inactive vested participants, and retired participants and beneficiaries as of October 1, 2016, provided by the City’s Employee Benefits Department;

The assets of the Plan as of September 30, 2016, provided by the City’s Office of Business Finance Services;

Economic assumptions regarding future salary increases and investment earnings; and

Other actuarial assumptions, regarding employee terminations, retirement, death, etc.

The assumptions and methods used to value the Plan were approved by the Board based on the five-year experience study for the period ended September 30, 2014. Significant Issues in Valuation Year The following key findings were the result of this actuarial valuation: 1. The actuarially determined employer contribution (ADEC) increased from $27,359,700 (53.03% of projected payroll) as

of October 1, 2016 to $31,628,774 (56.04% of projected payroll) as of October 1, 2017. 2. The ADEC is shown for the fiscal year following the year for which the valuation is prepared. In this report, the

contribution for the fiscal year beginning October 1, 2017 has been determined. All contribution requirements shown in this report are calculated as of the beginning of the fiscal year.


ii

3. The reconciliation of the required city contribution from the fiscal year beginning October 1, 2016 to the fiscal year beginning October 1, 2017 is shown below. October 1, 2016 recommended contribution $27,359,700, or 53.03% of projected pay

October 1, 2017 recommended contribution, prior to September 30, 2001 charge base expiring $29,840,890, or 53.09% of projected pay

October 1, 2017 recommended contribution, after September 30, 2001 charge base expiring $29,143,521, or 51.85% of projected pay

October 1, 2017 recommended contribution, due to changing payroll inflation assumption per statute $29,066,959, or 51.50% of projected pay

October 1, 2017 recommended contribution, after required mortality assumption change $31,628,774, or 56.04% of projected pay

Please see Chart 14 on page 13 for further details of the factors contributing to the change in the contribution requirement. 4. The total increase in contributions is $4,269,014. Of this amount, $2,561,815 is due to the mandated mortality assumption

change. The overall increase was offset by $697,369 due to a prior charge base expiring. 5. Continuing in the October 1, 2017 valuation, there will be four consecutive years of amortization charge bases expiring,

which will lead to a decrease in the contribution requirement in those years, assuming plan experience matches the assumptions.

6. The Plan’s funded percentage based on the actuarial value of assets decreased from 82.95% to 80.12%. On a market value basis, the funded percentage decreased from 81.32% to 78.88%. Prior to the required mortality assumption change, the funded percentage was 83.86% on an actuarial value basis and 82.56% on a market value basis.

7. As indicated in Section 2, Subsection B of this report, the total unrecognized investment loss as of September 30, 2016 is $16,393,996. This investment loss will be recognized in the determination of the actuarial value of assets for funding purposes in the next few years, to the extent it is not offset by recognition of investment gains derived from future experience. This implies that earning the assumed rate of investment return of 7.75% per year (net of expenses) on a market value basis will result in investment losses on the actuarial value of assets in the next few years.


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8. The actuarial valuation report as of October 1, 2016 is based on financial information as of that date. Changes in the value of assets subsequent to that date, to the extent that they exist, are not reflected. Unfavorable asset experience will increase the actuarial cost of the Plan, while favorable experience will decrease the actuarial cost of the Plan. For example, a 10% change in the current year’s actuarial value of assets would produce a $4,860,712 change in the October 1, 2017 recommended contribution level. Because the actuarial value of assets involves a smoothing method, a 10% change in market value would not be fully reflected immediately in the actuarial value of assets. Rather, that effect would be spread over a period of years. We have shown the full impact immediately so as to indicate the sensitivity of costs to market fluctuations.

9. The actuarial value of assets, excluding excess reserves for State contributions, was 101.6% of market value as of the valuation date. The smoothing method provides for recognition of gains and losses over a 5-year period.

10. Currently assets held in trust for excess pension benefits total $8,393,203. This amount has been excluded from the determination of this year’s required contribution.

11. There were no plan changes reflected for the first time with this valuation. 12. Per Part VII, Chapter 112.64(5)(a), of Florida Statutes, the payroll growth assumption used for amortization purposes is not

allowed to exceed the average annual payroll growth for the preceding ten years. As a result, for amortization purposes only, the payroll growth assumption was lowered from 3.00% (Segal’s long-term assumption) to 2.76% for this valuation. The payroll growth assumption used in the prior valuation was 2.35%.

13. Chapter 2015-157 of Florida Law, which amended Florida Statute Section 112.63, mandated that local governmental pension plans, effective January 1, 2016, use the mortality tables and projection scales for mortality improvement used in either of the two most recent actuarial valuation of the Florida Retirement System (FRS). As a result the required mortality assumptions were reflected for the first time in this valuation. All changes in mortality are outlined in Exhibit VI of Section 4.


iv

Summary of Key Valuation Results

2017 2016 2015 Contributions for fiscal year beginning October 1:

Actuarially determined employer contribution (ADEC)1 $31,628,774 $27,359,700 $24,274,548 Actual employer contribution -- -- 24,274,548 Percentage of ADEC contributed -- -- 100%

Funding elements for plan year beginning October 1: Employer normal cost $11,347,429 $9,735,420 Market value of assets 511,863,840 477,051,308 Actuarial value of assets2 519,864,633 486,597,949 Actuarial accrued liability 648,886,021 586,606,921 Unfunded actuarial accrued liability 129,021,388 100,008,972 Funded ratio – market value of assets 78.88% 81.32% Funded ratio – actuarial value of assets 80.12% 82.95%

Demographic data for plan year beginning October 1: Number of retired participants and beneficiaries 698 680 Number of vested former participants3 15 13 Number of active participants 723 694 Total payroll $54,920,286 $50,407,170 Average payroll 75,962 72,633 Projected covered payroll $56,436,086 $51,591,738 $50,282,038

1Required contributions are assumed to be paid at the beginning of every year 2Excludes excess reserve for state contributions 3Includes terminated participants with employee contributions remaining in plan


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Important Information About Actuarial Valuations

An actuarial valuation is a budgeting tool with respect to the financing of future projected obligations of a pension plan. It is an estimated forecast – the actual long-term cost of the plan will be determined by the actual benefits and expenses paid and the actual investment experience of the plan.

In order to prepare a valuation, Segal Consulting (“Segal”) relies on a number of input items. These include:

Plan of benefits Plan provisions define the rules that will be used to determine benefit payments, and those rules, or the interpretation of them, may change over time. Even where they appear precise, outside factors may change how they operate. It is important to keep Segal informed with respect to plan provisions and administrative procedures, and to review the plan summary included in our report to confirm that Segal has correctly interpreted the plan of benefits.

Participant data An actuarial valuation for a plan is based on data provided to the actuary by the Fund. Segal does not audit such data for completeness or accuracy, other than reviewing it for obvious inconsistencies compared to prior data and other information that appears unreasonable. It is important for Segal to receive the best possible data and to be informed about any known incomplete or inaccurate data.

Assets The valuation is based on the market value of assets as of the valuation date, as provided by the Fund, which uses an “actuarial value of assets” that differs from market value to gradually reflect year-to-year changes in the market value of assets in determining the contribution requirements.

Actuarial assumptions In preparing an actuarial valuation, Segal projects the benefits to be paid to existing plan participants for the rest of their lives and the lives of their beneficiaries. This projection requires actuarial assumptions as to the probability of death, disability, withdrawal, and retirement of each participant for each year. In addition, the benefits projected to be paid for each of those events in each future year reflect actuarial assumptions as to salary increases and cost-of-living adjustments. The projected benefits are then discounted to a present value, based on the assumed rate of return that is expected to be achieved on the plan’s assets. There is a reasonable range for each assumption used in the projection and the results may vary materially based on which assumptions are selected. It is important for any user of an actuarial valuation to understand this concept. Actuarial assumptions are periodically reviewed to ensure that future valuations reflect emerging plan experience. While future changes in actuarial assumptions may have a significant impact on the reported results, that does not mean that the previous assumptions were unreasonable.


vi

The user of Segal’s actuarial valuation (or other actuarial calculations) should keep the following in mind:

The actuarial valuation is prepared at the request of the Board. Segal is not responsible for the use or misuse of its report, particularly by any other party.

An actuarial valuation is a measurement of the plan’s assets and liabilities at a specific date. Accordingly, except where otherwise noted, Segal did not perform an analysis of the potential range of future financial measures. The actual long-term cost of the plan will be determined by the actual benefits and expenses paid and the actual investment experience of the plan.

If the Fund is aware of any event or trend that was not considered in this valuation that may materially change the results of the valuation, Segal should be advised, so that we can evaluate it.

Segal does not provide investment, legal, accounting, or tax advice. Segal’s valuation is based on our understanding of applicable guidance in these areas and of the plan’s provisions, but they may be subject to alternative interpretations. The Board should look to their other advisors for expertise in these areas.

As Segal Consulting has no discretionary authority with respect to the management or assets of the Plan, it is not a fiduciary in its capacity as actuaries and consultants with respect to the Plan.

SECTION 2: Valuation Results for the City of Orlando Police Officers' Pension Fund

1

The Actuarial Valuation and Review considers the number and demographic characteristics 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, B, and C.

A. PARTICIPANT DATA

A historical perspective of how the participant population has changed over the past ten valuations can be seen in this chart.

CHART 1

Participant Population: 2007 – 2016

Year Ended September 30

Active Participants

Vested Terminated Participants1

Retired Participants and Beneficiaries2

Ratio of Non-Actives to Actives

2007 738 7 460 0.63

2008 741 10 490 0.67

2009 731 11 516 0.72

2010 718 9 542 0.77

2011 696 9 569 0.83

2012 721 14 600 0.85

2013 710 10 630 0.90

2014 698 9 659 0.96

2015 694 13 680 1.00

2016 723 15 698 0.99

1Includes terminated participants with employee contributions remaining in the plan. 2Includes suspended pensioners, if applicable.


2

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020406080

100120140160180200

Active Participants Plan costs are affected by the age, years of service and payroll of active participants. In this year’s valuation, there were 723 active participants with an average age of 40.4, average years of service of 11.6 years and average payroll of $75,962. The 694 active participants in the prior valuation had an average age of 40.5, average service of 11.8 years and average payroll of $72,633.

Inactive Participants In this year’s valuation, there were five participants with a vested right to a deferred or immediate vested benefit.

In addition, there were ten participants with their employee contributions remaining in the plan.

These graphs show a distribution of active participants by age and by years of service.

CHART 2 Distribution of Active Participants by Age as of September 30, 2016

CHART 3 Distribution of Active Participants by Years of Service as of September 30, 2016


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DROPs

Disability

Early

Regular

Retired Participants and Beneficiaries As of September 30, 2016, 649 retired participants and 49 beneficiaries were receiving total monthly benefits of $2,627,337. For comparison, in the previous valuation, there were 633 retired participants and 47 beneficiaries receiving monthly benefits of $2,497,704.

These graphs show a distribution of the current retired participants based on their monthly amount and age, by type of pension.

CHART 4 Distribution of Retired Participants by Type and by Monthly Amount as of September 30, 2016

CHART 5 Distribution of Retired Participants by Type and by Age as of September 30, 2016


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$ M

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Change in asset method

Adjustment toward market value

Benefits paid

Net interest and dividends

Net contributions

Retirement plan funding anticipates that, over the long term, both contributions (less administrative expenses) and net investment earnings (less investment fees) will be needed to cover benefit payments.

Retirement plan assets change as a result of the net impact of these income and expense components. Additional financial information, including a summary of these transactions for the valuation year, is presented in Section 3, Exhibits D, E and F.

B. FINANCIAL INFORMATION

The chart depicts the components of changes in the actuarial value of assets over the last ten years. Note: The first bar represents increases in assets during each year while the second bar details the decreases.

CHART 6 Comparison of Increases and Decreases in the Actuarial Value of Assets for Years Ended September 30, 2007 – 2016


5

It is desirable to have level and predictable plan costs from one year to the next. For this reason, the Board has 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 7

Determination of Actuarial Value of Assets for Year Ended September 30, 2016

1. Market value of assets, September 30, 2016 $511,863,840

Original Unrecognized

2. Calculation of unrecognized return Amount* Return**

(a) Year ended September 30, 2016 $2,691,175 $2,152,940

(b) Year ended September 30, 2015 -38,706,539 -23,223,923

(c) Year ended September 30, 2014 5,446,562 2,178,624

(d) Year ended September 30, 2013 12,491,815 2,498,363

(e) Year ended September 30, 2012 27,409,063 0

(f) Total unrecognized return -16,393,996

3. Preliminary actuarial value: (1) - (2f) 528,257,836

4. Adjustment to be within 20% corridor 0

5. Reserve for excess state contributions 8,393,203

6. Final actuarial value of assets as of September 30, 2016: (3) + (4) - (5) $519,864,633

7. Actuarial value as a percentage of market value: (6) ÷ (1) 101.6%

8. Amount deferred for future recognition: (1) - (3) -$16,393,996 *Total return minus expected return on a market value basis **Recognition at 20% per year over five years ***Deferred return as of September 30, 2016 recognized in each of the next five years:

(a) Amount recognized on September 30, 2017 -$3,615,398 10

(b) Amount recognized on September 30, 2018 -6,113,761

(c) Amount recognized on September 30, 2019 -7,203,073

(d) Amount recognized on September 30, 2020 538,235

(e) Amount recognized on September 30, 2021 0


6

250

300

350

400

450

500

550

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

$ M

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Actuarial Value

Market Value

Both the actuarial value and market value of assets are representations of the Police Fund’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 Police Fund’s liabilities are compared to these assets to determine what portion, if any, remains unfunded. Amortization of the unfunded actuarial accrued 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 past ten years.

CHART 8

Actuarial Value of Assets vs. Market Value of Assets as of September 30, 2007 – 2016


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.

The total loss is $10,643,473, including a gain of $531,962 from investments offset by $11,175,435 in losses from all other sources. The net experience variation from individual sources other than investments was 1.8% of the actuarial accrued liability. A discussion of the major components of the actuarial experience is on the following pages.

C. ACTUARIAL EXPERIENCE

CHART 9 Actuarial Experience for Year Ended September 30, 2016

1. Net gain from investments* $531,962

2. Net loss from administrative expenses -31,319

3. Net loss from other experience** -11,144,116

4. Net experience loss: (1) + (2) + (3) -$10,643,473

*Details in Chart 10

**Details in Exhibit V

This chart provides a summary of the actuarial experience during the past year.


8

Investment Rate of Return A major component of projected asset growth is the assumed rate of return. The assumed return should represent the expected long-term rate of return, based on the Police Fund’s investment policy. For valuation purposes, the assumed rate of return on the actuarial value of assets is 7.75%. The actual rate of return on an actuarial basis for the 2015-2016 plan year was 7.86%.

Since the actual return for the year was greater than the assumed return, the Police Fund experienced an actuarial gain during the year ended September 30, 2016 with regard to its investments.

This chart shows the gain due to investment experience.

CHART 10 Actuarial Value Investment Experience for Year Ended September 30, 2016

1. Actual return $38,656,960

2. Average value of assets 491,935,469

3. Actual rate of return: (1) ÷ (2) 7.86%

4. Assumed rate of return 7.75%

5. Expected return: (2) x (4) $38,124,998

6. Actuarial gain: (1) – (5) $531,962


9

Because actuarial planning is long term, it is useful to see how the assumed investment rate of return has followed actual experience over time. The chart below shows the rate of return on an actuarial basis compared to the market value investment return for the last ten years, including five-year and ten-year averages.

Based upon this experience and future expectations, the Board has maintained the assumed rate of return of 7.75%.

CHART 11 Investment Return – Actuarial Value vs. Market Value: 2007 - 2016

Net Interest and Dividend Income

Recognition of Capital Appreciation

Change in Asset Method

Actuarial Value Investment Return

Market Value Investment Return

Year Ended September 30 Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent

2007 $8,239,923 2.63% $25,855,269 8.25% - - - - $34,095,192 10.88% $46,136,886 13.31%

2008 9,345,513 2.71 1,979,204 0.57 - - - - 11,324,717 3.28 -67,375,145 -17.23

2009 8,024,143 2.26 -6,068,530 -1.71 - - - - 1,955,613 0.55 1,455,272 0.45

2010 6,539,090 1.85 -4,721,180 -1.33 $41,797,931 11.81% 43,615,841 12.33 33,046,935 10.33

2011 4,969,359 1.26 -60,203 -0.02 - - - - 4,909,156 1.25 10,038,461 2.88

2012 4,424,051 1.12 2,704,381 0.69 - - - - 7,128,432 1.81 55,721,246 15.74

2013 3,585,668 0.91 29,746,354 7.54 - - - - 33,332,022 8.45 44,778,363 11.10

2014 4,997,849 1.18 37,401,489 8.87 - - - - 42,399,338 10.05 40,857,125 9.23

2015 6,608,960 1.44 29,488,130 6.41 - - - - 36,097,090 7.85 -366,265 -0.08

2016 5,235,542 1.06 33,421,418 6.80 - - - - 38,656,960 7.86 39,481,720 8.32

Total $61,970,098 $149,746,332 $41,797,931 $253,514,361 $203,774,598

Five-year average return 7.29% 8.38%

Ten-year average return 6.46% 5.25%

Note: Each year’s yield is weighted by the average asset value in that year.


10

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Actuarial Value

Market Value

Subsection B described the actuarial asset valuation method that gradually takes into account fluctuations in the market value rate of return. The effect of this is to stabilize the actuarial rate of return, which contributes to leveling pension plan costs.

This chart illustrates how this leveling effect has actually worked over the years 2007 - 2016. The actuarial rate of return for 2010 reflects a change in asset method.

CHART 12

Market and Actuarial Rates of Return for Years Ended September 30, 2007 - 2016


11

Other Experience There are other 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:

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.

The net loss from this other experience for the year ended September 30, 2016 amounted to $11,144,116, which is 1.8% of the actuarial accrued liability.

Assumption Changes Chapter 2015-157 of Florida Law, which amended Florida Statute Section 112.63, mandated that local governmental pension plans, effective January 1, 2016, use the mortality tables and projection scales for mortality improvement used in either of the two most recent actuarial valuations of the Florida Retirement System (FRS). Certain adjustments are allowable, based on actual experience, but the baseline mortality table must align with the tables FRS uses. As a result, the required mortality assumptions have been modified in the October 1, 2016 actuarial valuation. All changes in mortality are outlined in Exhibit VI of Section 4.

The impact of the required assumption change increased the unfunded actuarial accrued liability by $28,931,535 and the annual required contribution by $2,561,815 or 4.54% of projected payroll.


12

The amount of annual contribution required to fund the Plan is comprised of an employer normal cost payment and a payment on the unfunded actuarial accrued liability. This total amount is then divided by the projected payroll for active members to determine the funding rate of 56.04% of payroll.

The City and the Pension Board have adopted financing periods of 15 years for experience gains and losses and 25 years for benefit, assumption and method changes.

Required contribution amounts have been determined using those periods.

The contribution requirements as of October 1, 2016 are based on all of the data described in the previous sections, the actuarial assumptions described in Section 4, and the Plan provisions adopted at the time of preparation of the Actuarial Valuation. They include all changes affecting future costs, adopted benefit changes, actuarial gains and losses and changes in the actuarial assumptions.

D. RECOMMENDED CONTRIBUTION

CHART 13 Recommended Contribution

Year Beginning October 1

2016 2015

Amount

% of Payroll Amount

% of Payroll

1. Total normal cost $15,750,767 28.68% $13,790,087 27.35%

2. Administrative expenses 190,320 0.34% 161,254 0.32%

3. Expected employee contributions -4,593,658 -8.36% -4,215,921 -8.36%

4. Employer normal cost: (1) + (2) + (3) $11,347,429 20.66% $9,735,420 19.31%

5. Actuarial accrued liability 648,886,021 586,606,921

6. Actuarial value of assets 519,864,633 486,597,949

7. Unfunded actuarial accrued liability: (5) - (6) $129,021,388 $100,008,972

8. Payment on projected unfunded actuarial accrued liability 19,431,837 35.38% 16,996,090 33.72%

9. Total recommended contribution: (4) + (8)* $30,779,266 56.04% $26,731,510 53.03%

10. Total payroll 54,920,286 50,407,170

11. Total recommended contribution, projected to October 1, 2017 and 2016 $31,628,774 56.04% $27,359,700 53.03%

12. Projected payroll $56,436,086 $51,591,738

*Excludes excess reserve for state contributions. Contribution shown as of the beginning of the plan year, and must be adjusted with interest at 7.75% to the date actually paid.

The chart compares this valuation’s recommended contribution with the prior valuation.


13

Reconciliation of Recommended Contribution The chart below details the changes in the recommended contribution from the prior valuation to the current year’s valuation.

The chart reconciles the contribution from the prior valuation to the amount determined in this valuation.

CHART 14 Reconciliation of Recommended Contribution from October 1, 2016 to October 1, 2017

Recommended Contribution as of October 1, 2016 $27,359,700

Effect of increase in projected payroll 2,449,548

Effect of change in mortality assumption due to Florida Statutes 2,561,815

Effect of change in administrative expense assumption 29,749

Effect of investment gain -50,759

Effect of increasing payroll inflation assumption for amortization purposes due to Florida Statutes -76,562

Effect of completion of amortization schedule for prior bases -697,369

Effect of other gains and losses on accrued liability and net other changes 52,652

Total change $4,269,074

Recommended Contribution as of October 1, 2017 $31,628,774

SECTION 3: Supplemental Information for the City of Orlando Police Officers' Pension Fund

14

EXHIBIT A Table of Plan Coverage


Category 2016 2015 Change From

Prior Year Active participants in valuation:

Number 723 694 4.2% Average age 40.4 40.5 N/A Average years of service 11.6 11.8 N/A Projected total payroll* $54,920,286 $50,407,170 9.0% Projected average payroll 75,962 72,633 4.6% Account balances 40,079,439 37,805,225 6.0% Total active vested participants 390 388 0.5%

Vested terminated participants** 15 13 15.4%

Retired participants: Number in pay status 513 497 3.2% Average age 62.2 61.6 N/A Average monthly benefit $4,150 $4,046 2.6%

Disabled participants: Number in pay status 136 136 0.0% Average age 58.0 57.4 N/A Average monthly benefit $3,114 $3,068 1.5%

Beneficiaries in pay status: Number in pay status 49 47 4.3% Average age 68.2 66.6 N/A Average monthly benefit $1,529 $1,479 3.4%

*Reflects an extra pay period for the year ended September 30, 2016 **Includes terminated participants with employee contributions remaining in the plan


15

EXHIBIT B Participants in Active Service as of September 30, 2016 By Age, Years of Service, and Average Payroll

Years of Service Age Total 0 - 4 5 - 9 10 - 14 15 - 19 20 - 24 25 - 29

Under 25 11 11 - - - - - - - - - - $51,243 $51,243 - - - - - - - - - -

25 - 29 79 74 5 - - - - - - - - 56,303 55,737 $64,678 - - - - - - - -

30 - 34 141 63 69 9 - - - - - - 65,313 56,581 71,181 $81,443 - - - - - -

35 - 39 111 22 42 41 6 - - - - 73,621 56,794 71,792 82,613 $86,685 - - - -

40 - 44 142 12 19 34 73 4 - - 81,889 57,276 72,332 83,355 87,814 $80,530 - -

45 - 49 145 4 8 23 72 31 7 87,227 57,854 73,088 81,388 86,739 96,072 $105,198

50 - 54 72 3 1 7 24 24 13 87,610 81,793 72,275 81,948 83,659 90,356 95,407

55 - 59 15 - - - - - - 6 8 1 85,633 - - - - - - 83,208 87,651 84,032

60 - 64 7 - - - - - - 2 3 2 94,163 - - - - - - 82,414 84,614 120,235

Total 723 189 144 114 183 70 23 $75,962 $56,436 $71,399 $82,454 $86,599 $91,771 $100,052


16

EXHIBIT C Reconciliation of Participant Data

Active

Participants

Vested Former

Participants1 Disabled

Participants Retired

Participants Beneficiaries Total Number as of October 1, 2015 694 13 136 497 47 1,387

New participants 60 N/A N/A N/A N/A 60 Terminations – with vested rights -5 5 0 0 0 0 Terminations – without vested rights 0 N/A N/A N/A N/A 0 Retirements -20 0 N/A 20 N/A 0 New disabilities -1 0 1 N/A N/A 0 Return to work 1 -1 0 0 N/A 0 Deceased -1 0 -1 -4 0 -6 New beneficiaries 0 0 0 0 3 3 Lump sum payouts -5 -4 0 0 0 -9 Rehire 0 0 N/A 0 N/A 0 Certain period expired N/A N/A 0 0 -1 -1 Data adjustments 0 22 0 0 0 2

Number as of October 1, 2016 723 15 136 513 49 1,436

1Includes terminated participants with employee contributions remaining in the plan. 2Hired, terminated within the past valuation cycle and left employee contributions in plan.


17

EXHIBIT D Summary Statement of Income and Expenses on an Actuarial Value Basis

Year Ended September 30, 2016 Year Ended September 30, 2015 Net assets at actuarial value at the beginning of the year $486,597,949 $454,608,159 Contribution income:

Employer contributions $22,119,219 $21,801,018 Employee contributions 4,423,731 4,323,405 Chapter 185 Taxes contributions 2,155,329 2,155,329 Excess premium taxes 721,088 435,601 Less administrative expenses -190,320 -161,254

Net contribution income $29,229,047 $28,554,099 Investment income:

Interest and dividends $6,542,394 $7,831,264 Net securities lending 106,715 99,159 Recognition of capital appreciation 33,421,418 29,488,130 Less investment fees -1,413,567 -1,321,463

Net investment income 38,656,960 36,097,090 Total income available for benefits $67,886,007 $64,651,189

Less benefit payments: Pension Payments -$33,755,832 -$32,188,638 Refunds -142,403 -37,160

Net benefit payments -$33,898,235 -$32,225,798

Less excess premium taxes to reserve -$721,088 -$435,601

Change in actuarial value of assets $33,266,684 $31,989,790

Net assets at actuarial value at the end of the year $519,864,633 $486,597,949


18

EXHIBIT E Summary Statement of Income and Expenses on a Market Value Basis

Year Ended September 30, 2016 Year Ended September 30, 2015 Net assets at market value at the beginning of the year $477,051,308 $481,089,272 Contribution income:

Employer contributions $22,119,219 $21,801,018 Employee contributions 4,423,731 4,323,405 Chapter 185 Taxes contributions 2,155,329 2,155,329 Excess premium taxes 721,088 435,601 Less administrative expenses -190,320 -161,254

Net contribution income 29,229,047 28,554,099 Investment income:

Interest and dividends $6,542,394 $7,831,264 Net securities lending 106,715 99,159 Asset appreciation 34,246,178 -6,975,225 Less investment and administrative fees -1,413,567 -1,321,463

Net investment income 39,481,720 -366,265 Total income available for benefits $68,710,767 $28,187,834

Less benefit payments: Pension Payments -$33,755,832 -$32,188,638 Refunds -142,403 -37,160

Net benefit payments -$33,898,235 -$32,225,798

Change in market value of assets $34,812,532 -$4,037,964

Net assets at market value at the end of the year $511,863,840 $477,051,308

Total realized investment gains (losses) $8,724,252 $30,536,132 Total unrealized investment gains (losses) 25,521,926 -37,511,357 Total $34,246,178 -$6,975,225


19

EXHIBIT F Summary Statement of Plan Assets

Year Ended September 30, 2016 Year Ended September 30, 2015 Cash equivalents $2,313 $751,442 Investments:

Equities $201,421,241 $193,969,785 Fixed income investments 169,803,303 160,181,564 Global Assets 51,659,436 41,177,014 Alternative investments 40,045,836 39,664,946 Real Estate 32,563,265 35,826,671 Short-term investments 17,268,801 0 Direct lending 0 6,037,279

Total investments at market value 512,761,882 476,857,259 Total assets $512,764,195 $477,608,701

Less accounts payable: Accounts payable -$185,355 -$197,393 Due to other funds -715,000 -360,000

Total accounts payable -$900,355 -$557,393

Net assets at market value $511,863,840 $477,051,308 Net assets at actuarial value $519,864,633 $486,597,949


20

EXHIBIT G Development of the Fund Through September 30, 2016


Employer

Contributions Employee

Contributions

Chapter 185 Premium Taxes1

Net Investment

Return2 Administrative

Expenses Benefit

Payments

Addition to Reserve For Excess State Contributions

Actuarial Value of

Assets at End of Year

2007 $8,986,310 $3,718,874 $2,996,308 $34,095,192 $161,106 $17,100,697 $840,979 $342,115,857 2008 9,516,264 3,937,281 2,996,308 11,324,717 215,722 18,460,600 840,979 350,373,126 2009 11,429,082 4,064,050 2,678,282 1,955,613 191,341 19,852,147 522,953 349,933,712 2010 11,661,500 4,130,671 2,421,496 43,615,8413 200,144 22,340,107 266,167 388,956,8023 2011 13,140,024 4,114,606 2,403,427 4,909,156 248,621 23,636,894 248,098 389,390,402 2012 14,946,622 4,115,214 2,361,934 7,128,432 232,252 26,618,360 206,604 390,885,388 2013 16,373,465 4,247,052 2,458,292 33,332,022 172,590 29,562,764 302,963 417,257,902 2014 19,380,225 4,398,799 2,404,617 42,399,338 179,293 30,804,141 249,288 454,608,159 2015 21,801,018 4,323,405 2,590,930 36,097,090 161,254 32,225,798 435,601 486,597,949 2016 22,119,219 4,423,731 2,876,417 38,656,960 190,320 33,898,235 721,088 519,864,633

1Includes excess premium taxes 2Net of investment fees 3Includes asset method change of $41,797,931


21

EXHIBIT H Development of Unfunded Actuarial Accrued Liability for Year Ended September 30, 2016

1. Unfunded actuarial accrued liability at beginning of year $100,008,972 2. Employer normal cost at beginning of year 9,735,420 3. Employer contributions plus state contribution less reserve increase -27,880,114 4. Interest (a) For whole year on (1) + (2) $8,505,190 (b) For half year on (3) -923,088 (c) Total interest 7,582,102

5. Expected unfunded actuarial accrued liability $89,446,380 6. Changes due to: (a) Net experience loss $10,643,473 (b) Changes in assumptions 28,931,535 (c) Total changes 39,575,008

7. Unfunded actuarial accrued liability at end of year $129,021,388


22

EXHIBIT I Table of Amortization Bases

Type*

Date Established

Initial Years

Initial Amount

Annual Payment*

Years Remaining

Outstanding Balance

Experience Loss 09/30/2002 15 $14,791,870 $2,186,438 1.00 $2,186,438 Experience Loss 09/30/2003 15 14,147,797 2,003,384 2.00 3,913,989 Experience Loss 09/30/2004 15 9,162,122 1,242,716 3.00 3,558,160 Experience Gain 09/30/2005 15 -4,451,127 -578,210 4.00 -2,157,078 Experience Gain 09/30/2006 15 -7,033,755 -882,226 5.00 -4,021,050 Experience Gain 09/30/2007 15 -9,822,841 -1,189,535 6.00 -6,360,166 Experience Loss 09/30/2008 15 19,096,044 2,232,553 7.00 13,616,683 Experience Loss 09/30/2009 15 27,132,541 3,062,231 8.00 20,874,302 Experience Loss 09/30/2010 15 31,909,744 3,476,412 9.00 26,076,599 Experience Loss 09/30/2011 15 24,998,822 2,632,605 10.00 21,465,287 Experience Loss 09/30/2012 15 23,907,604 2,433,539 11.00 21,356,807 Experience Loss 09/30/2013 15 3,062,719 301,317 12.00 2,823,221 Experience Gain 09/30/2014 15 -6,093,405 -582,668 13.00 -5,789,204 Experience Gain 09/30/2015 15 -315,275 -29,405 14.00 -308,038 Experience Loss 09/30/2016 15 10,643,473 968,432 15.00 10,643,473 Change in Assumptions 09/30/1996 25 2,396,858 340,420 5.00 1,551,583 Change in Assumptions 09/30/2005 25 -9,957,731 -951,639 14.00 -9,968,950 Change in Assumptions 09/30/2010 25 8,852,866 707,253 19.00 9,068,574 Change in Assumptions 09/30/2015 25 21,030,032 1,437,285 24.00 21,090,141 Change in Assumptions 09/30/2016 25 28,931,535 1,929,534 25.00 28,931,535 Plan Amendment 09/30/1995 25 6,941,225 1,029,507 4.00 3,840,695 Plan Amendment 09/30/2003 25 8,490,209 886,906 12.00 8,309,957 Plan Amendment 09/30/2004 25 1,143,022 114,214 13.00 1,134,796 Change in Asset Method 09/30/2010 25 -41,797,931 -3,339,226 19.00 -42,816,366 Total $19,431,837 $129,021,388

*Level percentage of payroll; per Part VII, Chapter 112.64(5)(a ) of Florida Statutes, outstanding balances were amortized using a 2.76% payroll growth rate for the October 1, 2016 actuarial valuation. The equivalent single amortization period remaining as of October 1, 2016 is 8 years.


23

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 that 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) Withdrawal 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 value of all projected benefit payments for current members less the portion that

will be paid by future normal costs.

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 the interest that 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 J Definitions of Pension Terms


24

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.


25

EXHIBIT K Supplementary State of Florida Information - Summary of Salary Changes


Total Salary

Percent Change in Total Salary

Percent Change in

Salary of Employees Remaining Active

Expected Percent Change in Salary

of Employees Remaining Active

2006 $41,844,752 4.70% 1.24% 6.13% 2007 44,813,194 7.09% 4.53% 6.06% 2008 46,067,545 2.80% 4.96% 6.22% 2009 47,344,306 2.77% 5.66% 6.17% 2010 48,422,779 2.28% 5.30% 6.11% 2011 47,592,968 -1.71% 3.34% 4.98% 2012 48,578,107 2.07% 2.37% 4.87% 2013 48,942,003 0.75% 5.14% 5.23% 2014 49,185,208 0.50% 5.07% 5.26% 2015 50,407,170 2.48% 4.66% 5.47% 2016 54,920,286 8.95% 6.78% 4.47%

Note: The average total payroll growth for the most recent ten years was 2.76% per year.


26

EXHIBIT K (continued) Supplementary State of Florida Information – Recent History of Recommended and Actual Contributions

Enhancements

Recommended Contribution

Valuation Date

October 1

State

Contribution

Made

Amount

Available

Base

Amount

Allowable

Offset

Total

City

Actual City

Contribution 2016 -- -- -- $2,155,329 -- $27,359,700 $25,204,371 --

2015 $2,876,417 -- $721,088 2,155,329 $2,155,329 24,274,548 22,119,219 $22,119,219

2014 2,590,930 -- 435,601 2,155,329 2,155,329 23,956,347 21,801,018 21,801,018

2013 2,404,617 -- 249,288 2,155,329 2,155,329 21,535,554 19,380,225 19,380,225

2012 2,458,292 -- 302,963 2,155,329 2,155,329 18,528,794 16,373,465 16,373,465

2011 2,361,934 -- 206,604 2,155,329 2,155,329 17,101,951 14,946,622 14,946,622

2010 2,403,427 -- 248,098 2,155,329 2,155,329 15,295,353 13,140,024 13,140,024 2009 2,421,496 -- 266,167 2,155,329 2,155,329 13,816,829 11,661,500 11,661,500

2008 2,678,282 -- 522,953 2,155,329 2,155,329 13,584,411 11,429,082 11,429,082

2007 2,996,308 -- 840,979 2,155,329 2,155,329 11,671,593 9,516,264 9,516,264

2006 2,996,308 -- 840,979 2,155,329 2,155,329 11,141,639 8,986,310 8,986,310

2005 3,049,462 -- 894,133 2,155,329 2,155,329 11,999,364 9,844,035 9,844,035

2004 2,996,307 -- 840,978 2,155,329 2,155,329 12,761,867 10,606,538 10,606,538

2003 3,007,391 -- 852,062 2,155,329 2,155,329 10,431,649 8,276,320 8,276,320

2002 2,796,637 -- 641,308 2,155,329 2,155,329 8,653,344 6,498,015 6,498,015

2001 2,505,993 -- 350,664 2,155,329 2,155,329 6,513,187 4,357,858 4,357,858

2000 2,185,944 -- 30,615 2,155,329 2,155,329 5,516,531 3,361,202 3,374,647

1999 2,304,050 -- 148,721 2,155,329 2,155,329 7,092,213 4,936,884 4,936,884

1998 1,935,057 -- -- 2,155,329 1,935,057 6,831,979 4,896,922 4,896,922

1997 2,155,329 -- N/A 2,155,329 2,155,329 7,244,684 5,089,355 5,089,355


27

EXHIBIT K (continued) Supplementary State of Florida Information – Recent History of Recommended and Actual Contributions

Fiscal Year Ended

September 30

Valuation Date September 30

Contribution Rate as Percent of

Valuation Payroll

Valuation

Payroll

Recommended

Contribution

Actual

Contribution 1994 1993 23.50% $18,328,648 $4,307,500 $4,307,500 1995 1994 25.54 21,746,572 5,553,800 5,553,800 1996 1995 23.99 23,467,378 5,630,951 5,630,951 1997 1996 29.54 24,071,638 7,110,988 7,110,988 1998 1997 28.12 25,765,341 7,244,684 7,244,684 1999 1998 25.30 27,008,750 6,831,979 6,831,979 2000 1999 25.30 28,032,120 7,092,213 7,092,213 2001 2000 18.37 30,038,249 5,516,531 5,529,976 2002 2001 19.89 32,747,165 6,513,187 6,513,187 2003 2002 24.76 34,952,565 8,653,344 8,653,344 2004 2003 28.08 37,147,683 10,431,649 10,431,649 2005 2004 32.36 39,442,561 12,761,867 12,761,867 2006 2005 30.02 39,966,520 11,999,364 11,999,364 2007 2006 26.63 41,844,752 11,141,639 11,141,639 2008 2007 25.37 44,813,194 11,671,593 11,671,593 2009 2008 28.84 46,067,545 13,584,411 13,584,411 2010 2008 28.84 47,910,247 13,816,829 13,816,829 2011 2009 31.06 49,238,078 15,295,353 15,295,353 2012 2010 34.04 50,238,633 17,101,951 17,101,952 2013 2011 37.52 49,377,704 18,528,794 18,528,794 2014 2012 42.73 50,399,786 21,535,554 21,535,554 2015 2013 47.62 50,312,379 23,956,347 23,956,347 2016 2014 48.28 50,282,038 24,274,548 24,274,548 2017 2015 53.03 51,591,738 27,359,700 -- 2018 2016 56.04 56,436,086 31,628,774 --

Note: The recommended contribution for the years ending September 30, 2007 and after reflect the assumption that recommended contributions are paid at the beginning of the plan year.


28

EXHIBIT K (continued) Supplementary State of Florida Information - Comparative Summary of Principal Valuation Results

Year Ended September 30, 2016 New

Assumptions Old

Assumptions Year Ended

September 30, 2015

Participant data Active members 723 723 694

Total annual payroll $54,920,286 $54,920,286 $50,407,170 Retired members and beneficiaries 698 698 680

Total annualized benefit $31,528,040 $31,528,040 $29,972,448 Terminated vested members 5 5 5

Total annualized benefit $76,583 $76,583 $76,583 Members entitled to a return of employee contributions 10 10 8

Actuarial value of assets1 $519,864,633 $519,864,633 $486,597,949 Present value of all future expected benefit payments:

Active members: Retirement benefits $320,512,366 $303,796,940 $279,127,602 Vesting benefits 2,074,405 2,056,502 1,443,648 Disability benefits 16,357,074 17,051,992 15,662,906 Death benefits 5,244,988 5,313,809 5,059,942 Return of contributions 40,079,439 40,079,439 37,805,225

Total $384,268,272 $368,298,682 $339,099,323 Terminated vested members2 881,751 870,845 768,701 Retired members and beneficiaries 389,562,357 371,726,323 356,028,345

Total $774,712,380 $740,895,850 $695,896,369 1Excludes reserve for excess state contributions 2Includes employee contributions remaining in plan


29

EXHIBIT K (continued) Supplementary State of Florida Information – Comparative Summary of Principal Valuation Results

Year Ended September 30, 2016 New

Assumptions Old

Assumptions Year Ended

September 30, 2015

Unfunded actuarial accrued liability $129,021,388 $100,089,853 $100,008,972 Actuarial present value of accrued benefits

Vested accrued benefits Active members $132,485,379 $127,579,436 $127,520,887 Inactive members* 881,751 870,845 768,701 Pensioners and beneficiaries 389,562,357 371,726,323 356,028,345

Nonvested active members 12,556,641 12,599,464 10,997,832 Total $535,486,128 $512,776,068 $495,315,765

Pension cost Normal cost, including administrative expenses $15,941,087 $15,377,614 $13,951,341 Expected employee contributions -4,593,658 -4,593,658 -4,215,921 Level % of payroll payment to amortize unfunded actuarial accrued liability 19,431,837 17,502,302 16,996,090 Total minimum annual cost payable monthly at valuation date 30,779,266 28,286,258 26,731,510 Payroll 54,920,286 54,920,286 50,407,170 As % of payroll 56.04% 51.50% 53.03% Total employer cost projected to budget year 31,628,774 29,066,959 27,359,700 Projected payroll 56,436,086 56,436,086 51,591,738 As % of projected payroll 56.04% 51.50% 53.03%

Present value of active members’ future salaries at attained age $440,145,369 $440,107,087 $402,744,398

*Includes employee contributions remaining in plan


30

EXHIBIT K (continued) Supplementary State of Florida Information - Actuarial Present Value of Accumulated Plan Benefits

The factors that affected the change in the actuarial present value of accumulated plan benefits from the preceding to the current benefit information date are as follows:

Factors

Change in Actuarial Present Value of

Accumulated Plan Benefits Actuarial present value of accumulated benefit as of October 1, 2015 $495,315,765 Benefits accumulated, net experience gain or loss, changes in data $14,394,586 Benefits paid -33,898,235 Interest 36,963,952 Changes in assumptions 22,710,060 Net increase 40,170,363 Actuarial present value of accumulated benefit as of October 1, 2016 $535,486,128

SECTION 4: Reporting Information for the City of Orlando Police Officers' Pension Fund

31

EXHIBIT I Summary of Actuarial Valuation Results

The valuation was made with respect to the following data supplied to us: 1. Retired participants as of the valuation date (including 49 beneficiaries in pay status) 698 2. Participants inactive during year ended September 30, 2016 with vested rights (including ten participants with employee contributions remaining in the plan)

15

3. Participants active during the year ended September 30, 2016 723 Fully vested 390 Not vested 333

The actuarial factors as of the valuation date are as follows:

1. Normal cost, including administrative expenses $15,941,087 2. Actuarial accrued liability 648,886,021 Retired participants and beneficiaries $389,562,357 Inactive participants with vested rights1 881,751 Active participants 258,441,913 3. Actuarial value of assets ($511,863,840 at market value) 519,864,6332 4. Unfunded actuarial accrued liability $129,021,388

1Includes employee contributions remaining in plan 2Excludes excess reserve for state contributions


32

EXHIBIT I (continued) Summary of Actuarial Valuation Results

The determination of the recommended contribution is as follows:

1. Total normal cost $15,750,767 2. Administrative expenses 190,320 3. Expected employee contributions -4,593,658 4. Employer normal cost: (1) + (2) + (3) $11,347,429 5. Net amortization payment as required by Part VII, Chapter 112, Florida Statutes (from Exhibit I) 19,431,837 6. Recommended contribution as of October 1, 2016: (4) + (5) $30,779,266 7. Total payroll $54,920,286 8. Employer minimum annual contribution: (6), projected to October 1, 2017 a. Dollar amount $31,628,774 b. Projected payroll $56,436,086 c. Percent of projected payroll 56.04%


33

EXHIBIT II History of Employer Contributions

Fiscal Year Ended

September 30

Actuarially Determined Employer Contributions

(ADEC)* Actual

Contributions Percentage Contributed

2008 $11,671,593 $11,671,593 100.0% 2009 13,584,411 13,584,411 100.0% 2010 13,816,829 13,816,829 100.0% 2011 15,295,353 15,295,353 100.0% 2012 17,101,951 17,101,952 100.0% 2013 18,528,794 18,528,794 100.0% 2014 21,535,554 21,535,554 100.0% 2015 23,956,347 23,956,347 100.0% 2016 24,274,548 24,274,548 100.0% 2017 27,359,700 -- -- 2018 31,628,774 -- --

*Prior to 2012, this amount was the Annual Required Contribution (ARC)


34

EXHIBIT III Schedule of Funding Progress

Actuarial Valuation

Date

Actuarial Value

of Assets (a)

Actuarial Accrued Liability

(AAL) (b)

Unfunded AAL

(UAAL) (b) - (a)

Funded Ratio

(a) / (b)

Covered Payroll

(c)

UAAL as a Percentage of

Covered Payroll

[(b) - (a)] / (c) 10/01/2007 $342,115,857 $354,666,691 $12,550,834 96.46% $44,813,194 28.01% 10/01/2008 350,373,126 381,002,165 30,629,039 91.96% 46,067,545 66.49% 10/01/2009 349,933,712 406,398,791 56,465,079 86.11% 47,344,306 119.26% 10/01/2010 388,956,802 443,696,404 54,739,602 87.66% 48,422,779 113.05% 10/01/2011 389,390,402 467,003,754 77,613,352 83.38% 47,592,968 163.08% 10/01/2012 390,885,388 490,507,471 99,622,083 79.69% 48,578,107 205.08% 10/01/2013 417,257,902 516,479,852 99,221,950 80.79% 48,942,003 202.73% 10/01/2014 454,608,159 541,514,562 86,906,403 83.95% 49,185,208 176.69% 10/01/2015 486,597,949 586,606,921 100,008,972 82.95% 50,407,170 198.40% 10/01/2016 519,864,633 648,886,021 129,021,388 80.12% 54,920,286 234.92%


35

60%

70%

80%

90%

100%

110%

120%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

AVA Basis

MVA Basis

EXHIBIT IV Funded Ratio

A critical piece of information regarding the Plan's financial status is the funded ratio. This ratio compares the actuarial value of assets to the actuarial accrued liabilities of the Plan as calculated. High ratios indicate a well-funded plan with assets sufficient to cover the plan's actuarial accrued liabilities. Lower ratios may indicate recent changes to benefit structures, funding of the plan below actuarial requirements, poor asset performance, or a variety of other factors.

The chart below depicts a history of the funded ratios for this plan. On a market basis, the funded ratio declined significantly with the 2008 market downturn, and is currently 79%. On an actuarial basis, the ratio has been relatively consistent and is currently 80%.


36

*Reflects effect of contribution deferral to following fiscal year

EXHIBIT V Supplementary GASB Information - Analysis of Financial Experience

Gain/(Loss) for Year Ended September 30,

Type of Activity 2016 2015 2014

Demographic

Retirement experience $4,580,910 $125,523 -$1,737,643

Disability retirements 170,396 1,509,275 1,647,306

Pre-retirement mortality 451,883 10,145 3,858

Turnover experience 90,775 -489,416 -320,881

Salary experience -7,010,639 1,614,902 570,337

Post-retirement mortality -2,359,700 -2,188,316 480,452

New active participants 187,312 550,017 324,481

Miscellaneous experience -4,447,293 122,828 -1,139,659

Total demographic experience -$8,336,356 $1,254,958 -$171,749

Economic

Investment income $531,962 -$703,616 $8,651,720

Administrative expenses -31,319 19,482 -7,239

Total economic experience $500,643 -$684,134 $8,644,481

Contribution timing* -2,807,760 255,549 -2,379,327

Composite Gain/(Loss) During Year -$10,643,473 $315,275 $6,093,405


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EXHIBIT V (continued) Supplementary GASB Information - Solvency Test

Valuation Date

October 1

(1) Active Member Contributions

(2) Accrued

Liability for Non-active Members

(3) Accrued

Liability for Active

Members (Employer - Financed Portion)

Actuarial Value of Assets*

Portion of Accrued Liabilities

covered by Actuarial Value

of Assets

(1) (2) (3) 2011 $32,017,200 $264,422,500 $170,564,000 $389,390,402 100.00% 100.00% 54.50% 2012 33,271,300 288,054,800 169,181,400 390,885,388 100.00 100.00 41.12 2013 34,447,900 313,608,900 168,423,100 417,257,902 100.00 100.00 41.09 2014 35,554,300 337,557,400 168,402,800 454,608,159 100.00 100.00 48.39 2015 37,805,200 356,797,000 192,004,700 486,597,949 100.00 100.00 47.91 2016 40,079,400 390,444,100 218,362,500 519,864,633 100.00 100.00 40.91

*Excludes excess reserve for state contributions


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Note: Data in exhibit excludes suspended penioners, if applicable.

EXHIBIT V (continued) Supplementary GASB Information - Schedule of Retirees and Beneficiaries

Valuation Date

October 1

Added to Rolls Removed from Rolls Rolls – End of Year

Number Annual

Allowance Number Annual

Allowance Number Annual

Allowance

% Increase in Annual

Allowances

Average Annual

Allowance 2011 35 $1,907,800 9 $125,200 568 $22,082,900 9.57% $38,900 2012 34 1,842,300 3 80,500 599 24,112,200 9.19 40,300 2013 37 2,047,400 6 113,300 630 26,293,000 9.04 41,700 2014 37 2,103,200 8 185,200 659 28,455,100 8.22 43,200 2015 27 1,336,600 6 135,000 680 29,972,400 5.33 44,100 2016 24 1,321,100 6 107,300 698 31,528,000 5.19 45,200


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EXHIBIT VI Actuarial Assumptions and Actuarial Cost Method

Rationale for Assumptions: The information and analysis used in selecting each assumption that has a significant effect on this actuarial valuation is shown in the Actuarial Experience Review for the five-year period ended September 30, 2014. Current data is reviewed in conjunction with each annual valuation. Changes from the prior year are listed at the end of this exhibit.

Mortality Rates: Pre-retirement: Male Non-Disabled (Special Risk): RP2000 Generational, 10% Combined Healthy

White Collar / 90% Combined Healthy Blue Collar, projected generationally with Scale BBM

Female Non-Disabled: RP2000 Generational, 100% Combined Healthy White Collar, projected generationally with Scale BBF

Healthy annuitants: Male Non-Disabled (Special Risk): RP2000 Generational, 10% Annuitant White Collar / 90% Annuitant Blue Collar, projected generationally with Scale BBM

Female Non-Disabled: RP2000 Generational, 100% Annuitant White Collar, projected generationally with Scale BBF

Disabled annuitants: Male Disabled (Special Risk): 60% RP2000 Disabled Male setback four years / 40% Annuitant White Collar with no setback, no projection scale

Female Disabled (Special Risk): 60% RP2000 Disabled Female set forward two years / 40% Annuitant White Collar with no setback, no projection date

The mortality tables are in compliance with Florida Statue Section 112.63(f).


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Termination Rates before Retirement: Rate (%)

Mortality* Disability**

Age Male Female Male Female 20 0.04 0.02 0.09 0.09

25 0.04 0.02 0.09 0.09

30 0.05 0.03 0.09 0.09

35 0.08 0.05 0.25 0.09

40 0.11 0.08 0.29 0.29

45 0.16 0.12 0.33 0.33

50 0.24 0.19 0.44 0.44

55 0.42 0.31 0.70 0.70

60 0.77 0.58 0.70 0.70 *95% of deaths are assumed to be duty-related **90% of disabilities are assumed to be duty-related.

Termination Rates before Retirement:

Years of Service

Rate of withdrawal*

Less than1 4.50%

1-10 1.50

10-16 0.50

16-20 0.25

20+ 0.00 *Rates cut off at eligibility for earliest retirement


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Retirement rates (each year, if eligible): Retirement Age for Inactive Vested Participants: Former employees with rights to deferred benefits are assumed to retire at earliest eligibility.

Percent Married: 80%

Percentage of Beneficiaries Paid: It is assumed that for retirees currently in pay status with a Joint and Survivor form of benefit, 50% of beneficiaries will ultimately receive a survivor benefit.

Age of Spouse: Females 3 years younger than males.

Net Investment Return: 7.75%, net of investment expenses

The net investment return assumption was chosen by the Pension Fund’s Board Members, with input from the actuary. This assumption is a long-term estimate derived from historical data, current and recent market expectations, and professional judgment. As part of the analysis, a building block approach was used that reflects inflation expectations and anticipated risk premiums for each of the portfolio’s asset classes, as well as the Fund’s target asset allocation.

Years of Service* Rate 20 35%

21-24 20

25 30

26 15

27 30

28 55

29 90

30+ 100

*Retirement is assumed to occur no later than age 65


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Salary Increases: Years of Service Rate (%)

Less than 2 10.00

2-3 7.50

3-9 6.25

10 or more 3.00

Note: Rates above reflect a 3.00% inflation assumption.

The salary scale assumption is based on the City’s pay plan, along with analysis completed in conjunction with an Actuarial Experience Review for the five-year period ended September 30, 2014.

Payroll Growth Rate: 2.76% used for amortization of unfunded liability amounts; the Fund’s long-term payroll growth assumption is 3.00%

Administrative Expenses: Previous year’s actual expenses; $190,320 for the year beginning October 1, 2016

Actuarial Value of Assets: The market value of assets less unrecognized returns in each of the last five years. Unrecognized return is equal to the difference between the actual market return and the projected market return based on the assumed investment rate of return, and is recognized over a five-year period. The actuarial value is further adjusted, if necessary, to be within 20% of the market value.

Actuarial Cost Method: Entry Age Normal Actuarial Cost Method. Entry Age is current age minus years of

service. Normal Cost and Actuarial Accrued Liability are calculated on an individual basis and are allocated by service, with Normal Cost determined as if the current benefit accrual rate had always been in effect.


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Changes in Assumptions: The payroll growth assumption changed from 2.35% to 2.76%, per Part VII, Chapter 112.64(5)(a) of Florida Statutes. The Fund’s long-term payroll growth assumption is 3.00%.

The mortality assumptions were required to be changed with the October 1, 2016 actuarial valuation as mandated in Chapter 2015-157 of Florida Law which amended Section 112.63 of Florida Statutes. As a result, the following changes were made to the mortality:

The pre-retirement mortality assumption for healthy male participants was changed from the RP-2000 Combined Healthy Mortality Table, set forward one year to RP-2000 Generational, 10% Combined Healthy White Collar/90% Combined Healthy Blue Collar Mortality Table, projected with Scale BBM. For healthy female participants, the assumption was changed from the RP-2000 Combined Healthy Mortality Table, set forward one year to RP-2000 Generational, 100% RP-2000 Generational Combined Healthy White Collar Mortality Table, projected with Scale BBF.

The post-retirement mortality assumption for healthy male annuitants was changed from the RP-2000 Combined Healthy Mortality Table, set forward one year to RP-2000 Generational, 10% Annuitant White Collar/90% Annuitant Blue Collar, projected with Scale BBM. For healthy female annuitants the assumption was changed from the RP-2000 Combined Healthy Mortality Table, set forward one year to RP-2000 Generational, 100% Annuitant White Collar, projected with Scale BBF.

The mortality assumption for disabled male retirees was changed from the RP-2000 Combined Healthy Mortality Table, set forward one year to 60% RP-2000 Disabled Male Retiree Mortality Table, set back four years/40% Annuitant White Collar with no setback. For disabled female retirees the assumption was changed from the RP-2000 Combined Healthy Mortality Table, set forward one year to 60% RP-2000 Disabled Female Retiree Mortality Table, set forward two years/40% Annuitant White Collar with no setback. No projection scale was added for disabled mortality.


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EXHIBIT VII Summary of Plan Provisions

This exhibit summarizes the major provisions of the City of Orlando Police Officers’ Pension Fund included in the valuation. It is not intended to be, nor should it be interpreted as, a complete statement of all plan provisions.

Plan Year: October 1 through September 30

Normal Retirement:

Age Requirement None

Service Requirement 20 years of credited service

Monthly Amount 70% of average monthly salary plus 2% of average monthly salary for each year of credited service in excess of 20 years (to a maximum of 5 years), plus additional 2% of average monthly salary for each year of credited service in excess of 40 years. Annual cost-of-living adjustment of 2% beginning at age 55.

Early Retirement:

Age Requirement 47

Service Requirement 10 years of credited service

Monthly Amount 2% of average monthly salary multiplied by years of service. If service is 20 years or more, normal pension amount.

Vesting:


Service Requirement 10 Years

Monthly Amount Less than 20 years of service: 2% of average monthly salary times years of service; payable at age 47.

20 or more years: Normal pension accrued.


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Disability:

On Duty


Service Requirement None

Monthly Amount 80% of average monthly salary; effective July 1, 1995, an annual cost-of-living adjustment of 2% beginning at age 55.

Off Duty


Service Requirement None

Monthly Amount Service less than 10 years: 3% of average monthly salary times years of service

10-15 years of service: 4% of average monthly salary times years of service

16-20 years of service: 60% of average monthly salary

20+ years: 60% of average monthly salary plus an additional 4% for each additional year of service over 20 years, to a maximum of 80% of average monthly salary.

Pre-Retirement Death Benefit:

On Duty

Requirement Death while in active service

Monthly Amount 60% of average monthly salary

Off Duty

Requirement Death from causes unconnected with and not a direct result of the performance of duties while in active service

Amount Service less than 10 years: Refund of contributions.

10 years or more years of service: 65% of amount of pension computed as if the decedent had retired under the off-duty disability provision, payable monthly


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Post-Retirement Death Benefits:

On Duty Disability or Service Requirement

Monthly Amount The surviving spouse is paid 75% of the decedent’s pension.

Off Duty Disability Retirement

Monthly Amount The surviving spouse is paid 65% of the decedent’s pension.

Deferred Retirement Option Provision (DROP): A participant may retire at any time after completing 21 years of service with the

option to BACKDROP for up to three years but not prior to the date the participant became eligible for a service pension. The retirement benefit amount is calculated based upon service and salary at the retroactive BACKDROP date. Up to 36 months of this benefit amount will be used in determining the BACKDROP lump-sum which shall accrue earnings at 8% interest, compounded annually from the retroactive retirement date. The BACKDROP account is payable to the participant upon termination of employment. A BACKDROP participant will not be eligible to participate in cost-of-living increases during the BACKDROP period.

Average Monthly Salary: Average of the last 36 months of credited service. If total credited service is less than 3 years, the monthly average of total salary paid shall be used. Salary includes base pay, differential pay, longevity pay, incentive pay and career development pay. Salary does not include overtime pay, education advancement pay, firearm’s qualification pay or any item not specifically included.

Participation: All police officers and managers regularly and continually employed in the police department.


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Employee Contributions: 1% of salary for management employees 2% of salary for non-management employees

0.40% of salary to finance the 1998 removal of the age 47 requirement for normal retirement

3.33% of salary to finance cost-of-living adjustment, effective October 1, 1995

2.74% of salary to finance BACKDROP and other benefit enhancements effective July 1, 2003.

Changes in Plan Provisions: There have been no changes in plan provisions since the last valuation.

8513835v1/01391.001

city of orlando police officers' pension fund

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