1. Actuarial Audit of the Employees’ Retirement Fund of the City of Fort Worth
October 21, 2008

2. Purpose of the Actuarial Audit
Required by Government Code Chapter
Review of valuation, studies, & reports over past 5 years
Emphasis placed on January 1, 2008 actuarial valuation & Ad Hoc COLA provision
Other issues of interest or concern to the City

3. Actuarial Audit Report Components
Plan Liability Audit
Actuarial Assumption & Cost Method Review
Summary of Findings & Recommendations
Ad Hoc COLA Elections
8.5% Investment Return Assumption
Valuation of Ad Hoc COLA

4. Funding Period (years)
Ad Hoc COLA Schedule
Funding Period (years)
COLA Increase
18.0 or less
4.0%
18.1 to 24.0
3.0%
24.1 to 28.0
2.0%
28.1 or greater
0.0%

5. Projected Ad Hoc COLAs
The above results were presented by GRS in the January 1, 2008 Actuarial Valuation

6. Ad-Hoc COLA Elections

7. Plan Liability Audit Results
Actuarial Valuation
Stanton Group
Difference
Actuarial Accrued Liability
$ 2,059,232,093
$ 2,030,294,579
-1.4%
Actuarial Value of Assets
$ 1,821,688,380
0.0%
Unfunded Actuarial Accrued Liability
$ ,543,713
$ ,606,199
-12.2%
Total Normal Cost Amount
$63,869,176
$ ,945,811
-3.0%
GASB 30-year Annual Required Employer Contribution
13.48%
12.44%
-7.7%
Funding Period (not including 1/1/2009 Ad-Hoc COLA)
13.8 years
10.5 years
-23.9%
Funding Period (including 4.0% 1/1/2009 Ad-Hoc COLA)
15.0 years
11.5 years
-23.3%

8. 8.5% Investment Return Assumption
Somewhat aggressive compared to most public plans
This issue was previously raised & discussed
New concerns related to Ad Hoc COLA
Lower assumption = Lower COLA’s
Investment risk has now shifted to certain retirees
Increased Member scrutiny of the investment return
Other related concerns about Member equity
Impact of salary increases on retiree COLA
Similar Members with different benefits

9. Valuation of Ad Hoc COLA
Before Ad Hoc COLA Provision
After Ad Hoc COLA Provision
5,517 Members
2.0% COLA
0.0%, 2.0%, 3.0% or 4.0% COLA
Guaranteed
Conditional upon funding period
Known to be 2.0%/year
Projected to be > or = 2.0% until 2023
$123.5M Liability
$0.0M Liability

10. Valuation of Ad Hoc COLA
ERF Position
Stanton Group Opinion
COLAs are conditional
COLAs are not required to be recognized as a liability
COLAs should be
recognized as a liability
Actuarial & Accounting Standards support position

11. Ad Hoc COLA Valuation Considerations
Goal of actuarial cost methods and accounting standards
Fund retirement benefits during working lifetimes
Attribute costs to period benefits are earned
Eliminate generational cost shifting
Consistency of results
This is a disclosure of liability issue
What is the opinion of the auditor?