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Bob Rast <br /> July 14, 2022 <br /> Due to the importance of these measurement results,the Board provided updated census data as of June <br /> 30, 2022. Because the benefits will be frozen,the AAL is based on the Unit Credit Cost method that <br /> measures the actuarial present value of the accrued benefits (PVAB)as of the valuation date (AAL = <br /> PVAB). The Unit Credit cost method is more appropriate for frozen plans than the Entry Age Normal cost <br /> method that has been used for long term funding policy measures in the past. <br /> Given the current economic environment, most investment firms are expecting lower pension returns over <br /> the next 5-10 years. tn addition, frozen pension funds often shift the allocation away from higher returning <br /> equities to fixed income as the plan population shifts from active and retired members to a plan that <br /> eventually only covers retirees. Based on these two considerations, we were asked to also provide the <br /> UAAL measurements at a lower discount rate to illustrate the sensitivity of results of this important <br /> assumption and how the cost could increase in the future due to lower market expectations or changes in <br /> the asset allocation. <br /> While these are long-term estimates, the financial markets have been very volatile this year, so the UAAL <br /> could be materially higher or lower than $11.35 million at the point when the proceeds from the pension <br /> obligation bond are deposited.As of now,the effective date of the plan amendment is expected to be <br /> October 1, 2022. At that time, the AAL, using the 7.25% discount rate, is projected to be approximately <br /> $15,750,000 or about$250 thousand higher.At that time, the assets could be higher or lower than the <br /> June 30, 2022 value of$4.150 million. <br /> While there is no way to precisely predict the UAAL at the time the bond proceeds are deposited, that <br /> volatility in the UAAL measurement will exist in the future as well. That is, the actual long-term cost of the <br /> Fund won't be known until the last participant passes away, but these estimates should provide the City <br /> with the actuarial information needed to determine the size of the bond issuance. <br /> Summary of Plan Changes <br /> In addition to freezing the benefit as of June 30, 2022, there were a few other changes made to the plan <br /> provisions that are listed below: <br /> ... Benefits earned in the Fund will be fully vested. <br /> ... Since service is frozen, Normal Retirement Age will change from age 55 with 20 years of service <br /> to age 55. Since all members were hired before age 35, this doesn't result in earlier eligibility, but <br /> rather addresses the fact that most active members will never reach 20 years of service. <br /> ... The Early Retirement Eligibility, Rule of 80,will be limited to those that already have 20 years of <br /> service as of the effective date of the amendment. <br /> ... Going forward, members will be eligible for in-service distributions once they reach retirement <br /> eligibility rather than having to terminate. That is, they can start their benefit at age 55 even if <br /> they haven't terminated employment yet. <br /> ... Since members can commence their benefit at age 55, eligibility for the DROP was frozen to <br /> those currently eligible as of the effective date of the plan freeze. <br /> ... The pre-retirement death benefit will be based on the frozen benefit without the minimum benefit <br /> based on 20 years of service. <br /> ... The disability benefit was reduced to the TLFFRA minimum of$1,200 per year until the member <br /> reaches age 55,then it reverts to the frozen benefit. <br /> ... Active members cease making contributions to the Fund. <br /> 2 <br />