1. P 3 Actuaries you can understand 1 FCERA Benefits and Reserves January 11, 2006 P

2. P 3 Actuaries you can understand 2 Syllabus FCERA Benefits –Valuation –Non-valuation FCERA Reserves

3. P 3 Actuaries you can understand 3 Valuation Benefits Guaranteed by County Included in contribution rates Two Classifications –General –Safety Two Tiers

4. P 3 Actuaries you can understand 4 Valuation Benefits Regular Benefits –Basic –COL Settlement Benefits –Supplemental (Section 6) –$15 Retiree (Section 8) –Retiree Health (Section 9)

5. P 3 Actuaries you can understand 5 Non-Valuation Benefits No guarantee Not vested Retirement Board discretion Paid from “Excess Earnings” –Earnings not credited to other reserves

6. P 3 Actuaries you can understand 6 Reserves What they are How they work

7. P 3 Actuaries you can understand 7 FCERA Reserves Valuation Reserves Contingency Reserve Non-Valuation Reserves

8. P 3 Actuaries you can understand 8 Valuation Reserves Member Accumulated Contributions –Basic, COL, and Settlement Employer Contributions –Basic, COL and Settlement

9. P 3 Actuaries you can understand 9 Non-Valuation Reserves Nonvested Retiree Health Purchasing Power COLA Undistributed Earnings

10. P 3 Actuaries you can understand 10 Rough Balances (in Millions) – 6/30/2005 Valuation $ 2,314 Contingency($ 49) Non-Valuation $ 72 Total $ 2,337

11. P 3 Actuaries you can understand 11 Cash Flow 1937 Act Pension Fund Member Contributions Employer Contributions Basic Benefits COLA Benefits Supplemental Benefits Settlement Benefits Earnings

12. P 3 Actuaries you can understand 12 Reserves VALUATION CONTINGENCYCONTINGENCY NONVALNONVAL Member Contributions Employer Contributions Basic Benefits COLA Benefits Supplemental Benefits UNDISTRIBUTEDUNDISTRIBUTED Settlement Benefits

13. P 3 Actuaries you can understand 13 Allocating Earnings 31591 (a) Regular interest shall be credited semiannually on June 30th and December 31st to all contributions in the retirement fund which have been on deposit for six months immediately prior to that date. …

14. P 3 Actuaries you can understand 14 Credit Regular Interest CONTINGENCYCONTINGENCY NONVALNONVAL UNDISTRIBUTEDUNDISTRIBUTED VALUATION Investment Return Assumption

15. P 3 Actuaries you can understand 15 Fill Contingency Reserve CONTINGENCYCONTINGENCY NONVALNONVAL UNDISTRIBUTEDUNDISTRIBUTED VALUATION COLA Up to 3%

16. P 3 Actuaries you can understand 16 Undistributed Earnings CONTINGENCYCONTINGENCY NONVALNONVAL UNDISTRIBUTEDUNDISTRIBUTED VALUATION COLA Up to 3%

17. P 3 Actuaries you can understand 17 Undistributed Earnings AKA Excess Earnings –Earnings available after: Crediting regular interest Filling Contingency Reserve –Calculated on smoothed basis –Limited expectations for near future

18. P 3 Actuaries you can understand 18 Undistributed Earnings Acceptable Uses under 37 Act –Save it (Bigger Contingency Reserve) –Pay for current benefits Regular benefits Settlement benefits –Pay for COL contributions –Create Additional Benefits

19. P 3 Actuaries you can understand 19 Additional Benefits Generally temporary (as long as money lasts) Reconfirmed by Retirement Board each year Examples –Purchasing Power COLA –Dollars for Retiree Health

20. P 3 Actuaries you can understand 20 Purchasing Power COLA Originally paid to retirees and beneficiaries who had lost 25% or more of purchasing power since beginning benefit payments

21. P 3 Actuaries you can understand 21 Purchasing Power COLA Retired on or before April 1, 1981 Approximately 575 retirees and beneficiaries FCERA Board decided to freeze benefits at current level Expected Assets needed: $12 million

22. P 3 Actuaries you can understand 22 Current Retiree Health Benefits Two Pieces –Settlement Section 9 –Non-guaranteed benefits

23. P 3 Actuaries you can understand 23 Settlement Section 9 $3 per year of service Maximum: $90 Guaranteed Additional amounts when additional undistributed earnings are available

24. P 3 Actuaries you can understand 24 Non-Guaranteed Benefits If member prior to 1990: –$45 plus –$3.50 per year of service If member after 1989: –$5 per year of service Maximum: $150

25. P 3 Actuaries you can understand 25 Current Features Paid to all annuitants Paid from the date of retirement Paid for life of member Same amount continues to beneficiary upon member’s death

26. P 3 Actuaries you can understand 26 Estimated Funded Percentage as of 6/30/2005 – Current Retiree Health Benefits $ in Millions Retiree Health Benefits Present Value Current Benefits $ 86.4 Actuarial Assets $ 60.5 Unfunded Projected Liability $ 25.9 Funded Percentage 70%

27. P 3 Actuaries you can understand 27 Questions