Corpus Christi Fire Fighters’ Retirement System · An actuarial valuation of the assets and...

Corpus Christi Fire Fighters’ Retirement System

Actuarial Valuation as of December 31, 2012

November 14, 2013

9500 Arboretum Blvd., Suite 200 Austin, Texas 78759

Phone: (512) 346-1590 Fax: (512) 345-7437

www.ruddwisdom.com

Post Office Box 204209 Austin, Texas 78720-4209

Rudd and Wisdom, Inc. CONSULTING ACTUARIES

Steven T. Anderson, F.S.A. Mitchell L. Bilbe, F.S.A. Evan L. Dial, F.S.A. Philip S. Dial, F.S.A. Charles V. Faerber, F.S.A., A.C.A.S. Mark R. Fenlaw, F.S.A. Carl L. Frammolino, F.S.A.

Kenneth J. Herbold, A.S.A. Christopher S. Johnson, F.S.A.

Oliver B. Kiel, A.S.A. Robert M. May, F.S.A.

J. Christopher McCaul, F.S.A. Edward A. Mire, F.S.A.

Rebecca B. Morris, A.S.A. Michael J. Muth, F.S.A.

Khiem Ngo, F.S.A. Coralie A. Taylor, A.S.A.

Ronald W. Tobleman, F.S.A. Kenneth Torng, A.S.A.

David G. Wilkes, F.S.A.

November 14, 2013

Board of Trustees Corpus Christi Fire Fighters’ Retirement System American Bank Plaza 711 N. Carancahua, Suite 724 Corpus Christi, Texas 78475 Members of the Board of Trustees: At the request of the Board of Trustees of the Corpus Christi Fire Fighters’ Retirement System, we have prepared this report of the results of the actuarial valuation of the system as of December 31, 2012. This valuation was prepared to determine whether the system has an adequate contribution arrangement. Section I of our report summarizes the valuation results and describes the data sources and assumptions used in the valuation. Section II shows the key results of the valuation and describes the reasons for the change in the amortization period from the previous valuation that we prepared. Section III explains special study considerations. The necessary information for the system’s compliance with Governmental Accounting Standards Board (GASB) Statement No. 25 and the city’s compliance with GASB Statement No. 27 is included as Exhibits 13 and 14.

We certify that we are members of the American Academy of Actuaries who meet Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained in this report.

Sincerely,

Mark R. Fenlaw, F.S.A.

Rebecca B. Morris, A.S.A. MRF;RBM:bb i:\clients\fire\wd\vals\2013\corpus\corpus-12-31-12.docx

CORPUS CHRISTI FIRE FIGHTERS’ RETIREMENT SYSTEM

ACTUARIAL VALUATION AS OF DECEMBER 31, 2012

RUDD AND WISDOM, INC. PAGE I

TABLE OF CONTENTS

Section I Valuation Summary ................................................................................... 1 Section II Key Results of the Actuarial Valuation ................................................... 6 Section III Special Studies ............................................................................................ 8 Exhibit 1 Distribution of Firefighters by Age and Service ..................................... 9 Exhibit 2 Summary of Pensioner Data ................................................................... 10 Exhibit 2A Firefighter and Pensioner Reconciliation .............................................. 11 Exhibit 3 Breakdown of Pensioners by Monthly Benefit Amounts ..................... 12 Exhibit 4 Historical Comparison of Actuarial Accrued Liability and

Actuarial Value of Assets ........................................................................ 13 Exhibit 5 Summary of Asset Data ........................................................................... 14 Exhibit 6 Development of Actuarial Value of Assets ............................................ 15 Exhibit 7 Historical Comparison of Market and Actuarial Value of

Assets ......................................................................................................... 16 Exhibit 8 Comparison of Market Value Asset Allocation as of the

Prior and Current Actuarial Valuation Dates ...................................... 17 Exhibit 9 Actuarial Methods and Assumptions ..................................................... 18 Exhibit 10 Disability Rates, Withdrawal Rates, and Salary Increases .................. 20 Exhibit 11 Definitions ................................................................................................. 21 Exhibit 12 Summary of Present Plan ........................................................................ 23 Exhibit 13 Disclosures in Accordance with GASB Statement No. 25 .................... 25 Exhibit 14 Disclosures in Accordance with GASB Statement No. 27 .................... 29



RUDD AND WISDOM, INC. PAGE 1

Section I

Valuation Summary An actuarial valuation of the assets and liabilities of the Corpus Christi Fire Fighters’ Retirement System as of December 31, 2012 has been completed. The valuation was based on the Present Plan (plan effective June 1, 2010) and the provisions of the Texas Local Fire Fighters’ Retirement Act (TLFFRA) which were in effect on December 31, 2012. Section II shows the key results of the actuarial valuation as of December 31, 2012 and discusses the changes since the prior valuation that we prepared as of December 30, 2010. This valuation reflects an actuarially assumed total contribution rate of 32.98%, comprised of 12.20% by the firefighters and a rate of 20.78% by the city. The total contribution rate of 32.98% exceeds the normal cost rate of 15.15%, leaving 17.83% available to amortize the unfunded actuarial accrued liability (UAAL) of $86,516,036. Assuming that the total payroll increases at the rate of 4.00% per year in the future, the contributions in excess of the normal cost will amortize the UAAL in 26.7 years. In order for a retirement plan to have an adequate contribution arrangement, contributions must be made that are sufficient to pay the plan’s normal cost and to amortize the plan’s UAAL over a reasonable period of time. Based on the Texas State Pension Review Board guidelines, our professional judgment, and the actuarial assumptions and methods used in making this valuation, we consider periods of 15 years to 25 years to be preferable and 40 years to be the maximum acceptable period. Since the total contributions are sufficient to pay the system’s normal cost and to amortize the system’s UAAL within the maximum acceptable period, we are of the opinion that the system, based on present levels of benefits and contributions, has an adequate contribution arrangement. Section III presents considerations for special studies of benefit improvements. Projected Actuarial Valuation Results In addition to completing this actuarial valuation, we estimated the amortization periods as of December 31, 2014 and as of December 31, 2016 by making projections from the December 31, 2012 actuarial valuation. These projections examine the effect on the amortization period in the next two actuarial valuations of the actuarial investment gains and losses that the system experienced in the four years prior to the valuation date (loss in 2011 and gains in 2009, 2010, and 2012) that have been only partially recognized as of December 31, 2012. As shown in Exhibit 6, a smoothing method is used to determine the actuarial value of assets (AVA) for this valuation. This method phases in over a five-year period any investment gains or losses (net actual investment return greater or less than the actuarially assumed investment return) that the system has had. The AVA used in this current valuation is deferring recognition of various portions of the gains and losses in




2009-2012 that the system experienced. The AVA used in this valuation is $105,753,324. The market value of assets is $108,857,871. The $3,104,547 difference between the market value and the AVA is the net of the deferred gains and losses that will be recognized in the next two actuarial valuations. The theory behind the AVA method is to allow time for investment gains and losses to partially offset each other and thereby dampen the volatility associated with the progression of the market value of assets over time. In practice, the timing and amounts of investment gains and losses can result in irregular effects on the AVA in a given year. However, as intended, the pattern of the AVA is smoother over time than the pattern of the market value of assets, as seen in Exhibit 7. For the purpose of projecting the amortization period through 2016 we used six scenarios of various assumed annual rates of investment return, net of expenses, over the 2013-2016 projection period. The projected amortization periods will not be the same as the actual amortization periods from completed future actuarial valuations but are the result of projected future actuarial valuation results based on the completed December 31, 2012 actuarial valuation. These projections show the expected effects over the next four years (1) of the recognition of the portions of the investment gains and losses over the past four years that are deferred as of December 31, 2012 and (2) of investment returns over the next four years different from the 8% assumption used in this valuation. Scenario

1 2 3 4 5 6 Assumed Investment Return

for Calendar Year

2013 2014 2015 2016 2017 and later

8% 8 8 8 8

20% 20 8 8 8

14% 10 10 10 8

14% 0 4 8 8

14% 4 4 4 8

14% 4 10 4 8

Amortization Period in Years

as of December 31: 2012 (actual) 2014 (projected) 2016 (projected)

26.7 23.4 21.1

26.7 19.7 13.1

26.7 21.9 17.5

26.7 22.9 22.1

26.7 22.5 21.1

26.7 22.5 19.9

The projected future December 31, 2014 valuation in Scenario 1 reveals that instead of decreasing by the expected two years from 26.7 years to 24.7 years, the amortization period is projected to decrease somewhat further to 23.4 years due to the gains from 2009 and 2010 being fully recognized as of December 31, 2014. The primary conclusion from Scenario 1 is that the amortization period will decrease somewhat faster than expected because of some deferred investment gains.




Is it realistic to expect that the market value rate of return could be high enough in 2013 and 2014 to lower the amortization period below 20 years as of December 31, 2014? Scenario 2 in the table helps answer this question by showing the projected amortization periods in the next two valuations based on an annual assumed investment experience of 20% over the next two plan years, with the assumed 8% each year thereafter. Those are the minimum equal rates of return in 2013 and 2014 required to get the amortization period just under 20 years as of December 31, 2014. Scenario 3 illustrates the effects of a 14% investment return in 2013 followed by three years of consistent investment returns above 8%. Comparing the amortization period of the projected 2016 valuation of Scenario 3 to that of Scenario 1 indicates about a 3.6-year reduction due to more favorable returns. Scenarios 4-6 show various combinations of returns in 2014-2016 following 14% assumed in 2013; the results of these scenarios are fairly close together. We do not know what the investment experience will be for each of the next four plan years. However, these scenarios, except for Scenario 2, present a range of plausible investment experience scenarios for the next valuations assuming no changes in benefits or contributions. The key potential favorable experience, in addition to the investment experience, will be whether the number of firefighters will increase significantly and whether the number of firefighters retiring will be much less than expected. Variations in experience from the underlying assumptions, other than investment return, will cause the actual amortization periods to be different from the periods shown above. In addition, the future investment experience in each of the next four years could be better or worse than the assumed rates shown. However, the primary conclusion from the scenarios is that it is unlikely the amortization period in the next actuarial valuation will be below 20 years. Participant and Asset Data We have relied on and based our valuation on the firefighter data, pensioner data, and asset data provided on behalf of the Board of Trustees by the system’s administrator, Ms. Gracie G. Flores. We have not audited the data provided but have reviewed it for reasonableness and consistency relative to the data provided for the December 31, 2010 actuarial valuation. Exhibit 1 is a distribution of the active firefighters by age and service. The salaries used for projecting future contributions and benefits in the valuation were based on the actual pay for the 2012 calendar year adjusted to reflect the 2% pay increase August 1, 2012. The total of these salaries is our assumed annualized covered payroll for the plan year beginning January 1, 2013 and is used in the valuation to determine the UAAL amortization period. The averages of the assumed salaries for the 2013 plan year are shown in Exhibit 1.




Exhibit 2 contains summary information on the pensioners. The monthly benefit payments are generally based on the amounts paid December 31, 2012. Exhibit 2A is a reconciliation of firefighters and pensioners from December 31, 2010 to December 31, 2012. Exhibit 3 shows a breakdown of the dollar level of the monthly benefits for retirees and surviving spouses. Exhibit 4 shows a historical comparison of the actuarial accrued liability and the actuarial value of assets. The summary of assets contained in Exhibit 5 is based on the December 31, 2012 market value of assets contained in the 2012 Annual Report to the Texas Fire Fighters’ Pension Commission. This exhibit also shows a comparison with the market values and actuarial values of assets as of December 31, 2010 and December 31, 2012. Exhibit 6 shows the development of the actuarial value of assets. Exhibit 7 shows a historical comparison between the market value and actuarial value of assets. A comparison of the market value asset allocation by asset class as of December 31, 2010 and December 31, 2012 is shown in Exhibit 8. Assumptions We selected actuarial assumptions we considered to be reasonable and appropriate for the system with respect to future rates of investment return, withdrawal, death, disability, service retirement, salary increases of firefighters and aggregate future firefighter payroll increases for this valuation. Significant actuarial assumptions used in the valuation are:

1. 8% annual investment return (interest rate) net of investment-related expenses;

2. 4.00% general annual pay (salary) increase plus an average of 1.47% per year for pay increases due to promotions and longevity over a 30-year career;

3. Retirement rates which result in an average expected age at retirement of 57.0; and

4. RP-2000 Combined Healthy Mortality Tables projected to 2014.

The following actuarial assumption changes have been made, and the new assumptions are compared to those used in the December 31, 2010 valuation:

1. The investment return assumption was changed from 8% net of all expenses to 8% net of investment-related expenses. An accompanying change in assumptions was to reflect general and administrative expenses assumed to be paid by the system by increasing the normal cost percent as a percent of aggregate payroll. In the past we have used an investment return assumption that was net of all expenses, including general and administrative expenses. See footnote 3 on page 6 for more detail.

2. Prior valuations used mortality assumptions that assumed all active and retired firefighters were male and all spouses were female. We changed in this valuation to begin using the actual gender of each firefighter, retiree, and spouse. This change had virtually no effect on the aggregate results.




A summary of all the assumptions and methods used in the valuation is shown in Exhibits 9 and 10. In our opinion, the assumptions used, both in the aggregate and individually, are reasonably related to the experience of the system and to reasonable expectations. The assumptions represent a reasonable estimate of anticipated experience of the system over the long-term future, and their selection complies with applicable actuarial standards of practice. Supporting Exhibits Exhibit 11 contains definitions of terms used in this actuarial valuation report. Exhibit 12 summarizes the plan provisions of the Present Plan. The disclosures in accordance with GASB Statement No. 25 are enclosed as Exhibit 13. This information will be needed for the system’s financial statements. The disclosures in accordance with GASB Statement No. 27 are enclosed as Exhibit 14. The GASB 27 disclosures will be needed for the city’s financial statements. Variability in Future Actuarial Measurement 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 current economic or demographic assumptions;

• Increases or decreases expected as part of the natural operation of the methodology used for these measurements;

• Changes in economic or demographic assumptions; and

• Changes in plan provisions. Analysis of the potential range of such future measurements resulting from the possible sources of measurement variability is typically outside the scope of an actuarial valuation. However, we provided projected amortization periods for the next two biennial actuarial valuations under six scenarios. Additional or other sensitivity analysis could be performed in a subsequent report if desired by the Board of Trustees. Respectfully submitted, RUDD AND WISDOM, INC.

Mark R. Fenlaw Rebecca B. Morris Fellow, Society of Actuaries Associate, Society of Actuaries Member, American Academy of Actuaries Member, American Academy of Actuaries




Section II Key Results of the Actuarial Valuation

December 31, December 31, 20101 2012 1. Actuarial present value of future benefits

a. Those now receiving benefits or former firefighters entitled to receive benefits

b. Firefighters c. Total

2. Actuarial present value of future normal cost

contributions

3. Actuarial accrued liability (Item 1c – Item 2)

4. Actuarial value of assets

5. Unfunded actuarial accrued liability (UAAL) (Item 3 - Item 4)

6. Contributions (percent of pay) a. Firefighters b. City of Corpus Christi c. Total

7. Normal cost (percent of payroll) 3

8. Percent of payroll available to amortize the UAAL

(Item 6c - Item 7)

9. Annualized covered payroll

10. Present annual amount available to amortize the UAAL (Item 8 x Item 9)

11. Years to amortize the UAAL2

12. GASB 27 funded ratio (Item 4 ÷ Item 3)

$ 86,155,793 132,530,749 $ 218,686,542

$ 41,121,212

$ 177,565,330

$ 104,079,845

$ 73,485,485

12.20% 20.78%

32.98%

14.82%

18.16%

$ 27,723,867

$ 5,034,654

22.3 years2

58.6%

$ 99,673,835 135,471,932 $ 235,145,767

$ 42,876,407

$ 192,269,360

$ 105,753,324

$ 86,516,036

12.20% 20.78%

32.98%

15.15%

17.83%

$ 29,459,098

$ 5,252,557

26.7 years 55.0%

1 All items are from the December 31, 2010 actuarial valuation and reflect the Present Plan. 2 Calculated reflecting the city’s resolution to contribute a schedule of increasing contribution rates, with a

rate of 18.78% in 2011 and reaching the ultimate rate of 20.78% in 2013 and each subsequent year. 3 In the December 31, 2010 valuation, the 8% investment return assumption was net of all expenses,

including general and administrative expenses. In the December 31, 2012 valuation, the 8% investment return assumption is net of investment-related expenses; general and administrative expenses are reflected as a percent of aggregate payroll, with the normal cost percent increased by 0.74%.




Change in Amortization Period The amortization period, based on the Present Plan provisions, was determined in the actuarial valuation as of December 31, 2010 to be 22.3 years. Since two years have passed since that valuation date, a 20.3-year amortization period would be expected if all actuarial assumptions had been exactly met, no changes had occurred (other than those expected) in the firefighter and pensioner data, and no changes in assumptions or methods had been made. The amortization period is now 26.7 years based on the same plan provisions. The actual experience occurring between December 31, 2010 and December 31, 2012 differed from the expected experience, and in combination with the changes in actuarial assumptions, the resulting amortization period was 26.7 years, which is 6.4 years more than the expected 20.3-year period for the following reasons: 1. The average annual rate of investment return, net of all expenses, on the market value

of assets during the two plan years 2011 and 2012 was 6.8%. However, the actuarial value of assets (AVA) used in the valuation and the determination of the amortization period is based on an adjusted market value. The average annual rate of return on the AVA, net of all expenses, for plan years 2011 and 2012 was 3.5% compared to the assumed rate of return for those years of 8%. This caused an increase in the amortization period of 4.7 years.

2. The aggregate payroll increased at an average rate of 3.1% per year instead of increasing at the assumed 4.0%, which caused the amortization period to increase by 0.8 of a year.

3. The net result of all experience other than the investment experience and the aggregate payroll experience had the combined effect of decreasing the amortization period by 0.3 of a year. This was the net result of some unfavorable experience and some favorable experience in the last two plan years.

4. The result of the changes in actuarial assumptions (primarily the recognition of general and administrative expenses) had the effect of increasing the amortization period by 1.2 years.




Section III

Special Studies The results of this actuarial valuation as of December 31, 2012 reveal that the system, based on the Present Plan of benefits, has an adequate contribution arrangement. As disclosed in both Sections I and II, the amortization period of the UAAL is 26.7 years. With an amortization period of 26.7 years, we are not willing to give the actuarial approval required by the provisions of Section 7 of the Texas Local Fire Fighters’ Retirement Act (TLFFRA), shown below, to increase benefits unless there is an adequate increase in the total contributions. In recent years we have been willing to approve increases in benefits that would increase the amortization period to 25 years. Benefit improvements may be made to the plan in accordance with Section 7 of TLFFRA, as amended in May 2013. Section 7(a), 7(b) and 7(c) are shown below. “(a) The board of trustees of a retirement system may change the benefits or

eligibility requirements for benefits payable from the retirement system, may provide for reinstatement by a member of service credit previously forfeited, and may adopt or change other requirements for the payment of benefits, except as otherwise prohibited by this Act.

(b) Before a board of trustees chooses to adopt or change a benefit or requirement for payment of benefits under this section, the proposed addition or change must be approved by:

(1) an eligible actuary selected by the board; and (2) a majority of the participating members of the retirement

system voting on the addition or change by secret ballot at an election held for that purpose at which at least 50 percent of all participating members of the retirement system vote.

(c) To be eligible to approve an addition or change under this section, an actuary must be either a fellow of the Society of Actuaries or a member of the American Academy of Actuaries.”

We are not able to approve any increases in benefits at this time because the amortization period of the UAAL exceeds 25 years. The results of projections we made based on our December 31, 2012 actuarial valuation of the system, shown on page 2, indicated that it is likely that the amortization period will be below 25 years in the next actuarial valuation.




Exhibit 1

Distribution of Firefighters by Age and Service on December 31, 2012 with Average Annual Salary

Years

of Service

Age

Total Average Salary

Under 25 25-29 30-34 35-39 40-44 45-49 50-54 55-59

60 or Over

0 1 2 3 4

5 6 7 8 9

10 11 12 13 14

15 16 17 18 19

20-24 25-29 30-34 35-39 40-44

Totals

17 0 0 2 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0

0

19

12 0 0

10 0

4 5 3 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0

0

34

5 0 0 5 0

9

13 7 5 6

0 1 1 0 0

1 0 0 0 0

0 0 0 0

0

53

0 0 0 3 0

1 4 5 9

16

0 13 11

0 5

0 2 3 0 0

0 0 0 0

0

72

0 0 0 0 0

4 3 2 6 6

0 4

10 0 3

0 6 8 0 6

4 0 0 0

0

62

0 0 0 0 0

0 0 0 0 0

0 3 6 0 8

0 7 8 0 5

30 7 0 0

0

74

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 2 0 0 5

18 21 8 0

0

54

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

8 9

17 1

0

35

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 1 1 1

2

5

34 0 0

20 0

18 25 17 20 28

0

21 28 0

16

1 17 19 0

16

60 38 26 2

2

408

$37,200 0 0

63,043 0

68,148 70,145 70,019 69,615 73,623

0

72,144 73,898

0 77,326

63,561 75,133 79,316

0 85,054

80,722 79,418 80,520 81,797 80,348

$72,204

Average Salary $39,958 $56,065 $66,976 $72,294 $75,970 $78,725 $79,938 $80,044 $69,732 $81,791




Exhibit 2

Summary of Pensioner Data

Type of Benefit

Pensioner Data Used in December 31, 2012 Valuation

Number of Recipients

Total Monthly Benefit Payments

Service Retirement1 Disability Retirement1 Not Eligible for Service Retirement Eligible for Service Retirement Vested Terminated (Deferred)

Surviving Spouse Surviving Child Total

117

56 65 12 59 4 313

$ 355,148 123,683 222,932 31,329 130,364 8,327 $ 871,783

1 Includes alternate payees.

Type of Benefit

Comparison of Pensioner Count by Type as of The Prior and Current Actuarial Valuations

December 31, 2010 New1 Ceased December 31, 2012

Service Retirement1 Disability Retirement1 Not Eligible for Service Ret. Eligible for Service Ret. Vested Terminated (Deferred) Surviving Spouse Surviving Child Total

108 54 52 10 53 4 281

+18 +3 +15 +2 +8 0 +46

-9 -1 -2 0 -2 0 -14

117 56 65 12 59 4 313

1 Includes alternate payees.




Exhibit 2A Firefighter and Pensioner Reconciliation

Firefighters

Current Payment

Status

Vested Terminated Firefighters Total

1. As of December 31, 2010 2. Change of status a. retirement b. disability c. death d. survivor payment begins e. withdrawal f. vested termination g. QDRO alternate payee h. net changes 3. New firefighters 4. As of December 31, 2012

416

(15) (17)

0 0

(8) (2)

0 (42)

34

408

271 1,2

15 17

(14) 8 0 0

4 30

0

301 3,4

10

0 0 0 0 0 2

0 2

0

12

697

0 0

(14) 8

(8) 0

4 (10)

34

721

1 Includes ten alternate payees. 2 Excludes two alternate payees and one surviving child not separately included in the data; however,

each one’s benefit amount is combined with another pensioner’s amount. 3 Includes 14 alternate payees. 4 Excludes one alternate payee and one surviving child not separately included in the data; however, the

benefit amounts are combined with the respective pensioners’ amounts.




$1,000-$1,99911%

$2,000-$2,99927%

Under $1,0002%

$3,000 & Over60%

Exhibit 3

Breakdown of Pensioners by Monthly Benefit Amounts as of December 31, 2012

Retirees Surviving Spouses

Under $1,000 $1,000-$1,999 $2,000-$2,999 $3,000 & Over

Under $1,00027%

$1,000-$1,99919%

$2,000-$2,99925%

$3,000 & Over29%




Exhibit 4

Historical Comparison of Actuarial Accrued Liability and Actuarial Value of Assets(Present Plan Valuations as of December 31)

0

25

50

75

100

125

150

175

200

2004 2006 2008 2010 2012

Actuarial Value of Assets Actuarial Accrued Liability

$ in Millions

59% 55%

69% 69% 57%




Exhibit 5

Summary of Asset Data

Asset Type

Market Value as of

December 31, 2012

Allocation As a Percent

of Grand Total Equities Large Cap Equities Small Cap Equities and Mutual Fund International Equities Mutual Funds Total Fixed Income Cash and Miscellaneous Cash and Equivalents Accrued Interest and Dividends Receivables and Other Payables Total Grand Total

$34,290,261 11,523,719

19,882,633 65,696,613

40,687,907

1,882,223 318,521 385,644

(113,037) 2,473,351

$108,857,871

31.5% 10.6

18.2 60.3

37.4

1.7 0.3 0.4

(0.1) 2.3

100.0%

Comparison of Asset Values as of the Prior and Current Actuarial Valuation Dates

Market Value Actuarial Value

December 31, 2010 $100,634,204 $104,079,845

December 31, 2012 $108,857,871 $105,753,324




Exhibit 6 Development of Actuarial Value of Assets

Calculation of Actuarial Investment Gain/(Loss) Based on Market Value for Plan Years Ending December 31 2012 2011 2010 2009

1. Market Value of Assets as of Beginning of Year 2. Firefighter Contributions 3. City Contributions 4. Benefit Payments and Contribution Refunds 5. Miscellaneous Receipts 6. Expected Investment Return1 7. Expected Market Value of Assets as of End of Year 8. Actual Market Value of Assets as of End of Year 9. Actuarial Investment Gain/(Loss) 10. Market Value Rate of Return Net of Expenses 11. Rate of Actuarial Investment Gain/(Loss)

$98,089,891 3,422,315 5,654,358

(11,847,958) 0

7,738,472 103,057,078

108,857,871 5,800,793

14.0% 6.0%

$100,634,204 3,322,962 5,060,580

(11,136,431) 0

7,942,739 105,824,054 98,089,891

(7,734,163) 0.2% (7.8)%

$92,192,019 3,338,940 4,711,698

(9,232,730) 27,291

7,330,058 98,367,276

100,634,204 2,266,928

10.5% 2.5%

$76,848,963 3,045,288 4,251,377

(9,024,579) 2,539

6,080,230 81,203,818

92,192,019 10,988,201

22.5% 14.5%

1 Assuming uniform distribution of contributions and payments during the plan year; actuarially assumed investment return is 8% per year.

Deferred Actuarial Investment Gains/Losses to be Recognized in Future Years

Plan Year Investment Gain/(Loss)

Deferral Percentage

Deferred Gain/(Loss) as of 12/31/2012

2012 2011 2010 2009 Total

$5,800,793 (7,734,163) 2,266,928

10,988,201

80% 60% 40% 20%

$ 4,640,634 (4,640,498) 906,771 2,197,640 $ 3,104,547

Actuarial Value of Assets as of December 31, 2012 12. Market Value of Assets as of December 31, 2012 13. Deferred Gain/(Loss) to be Recognized in Future 14. Preliminary Value (Item 12 – Item 13) 15. Corridor for Actuarial Value of Assets a. 80% of Market Value as of December 31, 2012 (minimum) b. 120% of Market Value as of December 31, 2012 (maximum) 16. Actuarial Value as of December 31, 2012 17. Write Up/(Down) of Assets (Item 16 – Item 12)

$ 108,857,871 3,104,547 $ 105,753,324 $ 87,086,297 $ 130,629,445 $ 105,753,324 $ (3,104,547)




Exhibit 7

Historical Comparison of Market and Actuarial Value of Assets(Valuation as of December 31)

70

80

90

100

110

2004 2006 2008 2010 2012

Market Value Actuarial Value

$ in Millions




Equities62.2%

Cash & Equivalent

0.5%

Fixed Income37.3%

December 31, 2010

Equities60.3%

Cash & Equivalent

2.3%

Fixed Income37.4%

December 31, 2012

Exhibit 8

Comparison of Market Value Asset Allocation as of the Prior and Current Actuarial Valuation Dates




Exhibit 9

Actuarial Methods and Assumptions

1. Actuarial Cost Method Entry Age Actuarial Cost Method The actuarial present value of projected benefits for each firefighter included in the valuation is allocated as a level percentage of the earnings of the firefighter between age at hire and termination. Service is assumed to be continuous.

2. Amortization of Unfunded Actuarial Accrued Liability

The unfunded actuarial accrued liability is assumed to be amortized with level percentage of payroll contributions (total contribution rate less normal cost contribution rate) based on payroll growth of 4% per year.

3. Actuarial Value of Assets Method All assets are valued at market value with an adjustment made to uniformly spread actuarial gains or losses (as measured by actual market value investment return vs. expected market value investment return) over a five-year period. The total adjustment amount shall be limited as necessary such that the actuarial value of assets shall not be less than 80% of market value nor greater than 120% of market value. See Exhibit 6.

4. Investment Return Assumption Net of Investment-Related Expenses

8% per year

5. Inflation 4% per year

6. Mortality Rates a. Pre-retirement b. Post-retirement c. Post-disability

RP-2000 Combined Healthy Mortality Table projected to 2014 for males and for females (sex distinct) for all three categories.

7. Pay (Salary) Increase Assumption 4% per year in addition to 1.47% per year average pay increases due to promotion and longevity over a 30-year career. See Exhibit 10.




8. Retirement Rates 20% per year of those eligible to retire at ages 54-59, 98% at ages 60-69, and 100% at age 70, resulting in an average retirement age of 57.0.

9. RETRO DROP Benefits a. Percent of Firefighters Eligible

Electing this Option b. Months Assumed for Lump Sum

100% of service retirements eligible to elect at least a 12-month lump sum Maximum they are eligible for, up to 36 months

10. Withdrawal Rates See Exhibit 10.

11. Disability Rates See Exhibit 10.

12. Reduction in Benefit after 2½ Years of Disability Retirement

No reduction in benefit 25% 25% reduction in benefit 20 50% reduction in benefit 20 75% reduction in benefit 20 Benefit terminated 15 100%

13. Percent Married 85% of the firefighters are assumed to be married at retirement, disability, or death while employed and have a spouse two years younger.

14. Payment Form for Retirement Benefits Due to Service Retirement, Disability Retirement, or Vested Termination

• Joint and 100% to surviving spouse for the 85% assumed to be married

• Life annuity for the 15% assumed to be single

15. Surviving Child’s Death Benefit None are assumed as a result of future deaths.

16. Firefighter’s Assumed Contribution Rate (percent of covered pay)

12.20%

17. City’s Contribution Rate (percent of covered payroll)

20.78%

18. Covered Payroll for First Year Following Valuation Date

Actual pay for calendar year 2012 adjusted to reflect the 2% pay increase August 1, 2012.

19. General and Administrative Expenses Paid by the System

The normal cost contribution rate as a percent of payroll is assumed to be 0.74% of payroll higher to reflect these expenses.




Exhibit 10 Disability and Withdrawal Rates per 1,000 Active Members

Salary Rate Increase from Year t-1 to Year t

Disability Rates Withdrawal Rates Salary Increase Rates Attained

Age

Rate1 Years of Service

Rate

Years of Service

Rate

25 & under 26 27 28 29

30 31 32 33 34

35 36 37 38 39

40 41 42 43 44

45 46 47 48 49

50 51 52 53 54

55 & over

0.60 0.62 0.64 0.66 0.70

0.76 0.80 0.84 0.88 0.96

1.04 1.12 1.18 1.26 1.40

2.34 2.58 2.80 3.02 3.44

3.86 4.28 4.70 5.10 6.06

7.00 7.96 8.90 9.86

12.54

0.00

0 1 2 3 4

5 6 7 8 9

10 11 12 13 14

15 16 17 18 19

20 & over

30 27 24 21 18

16 14 12 11 10

8 7 6 5 5

5 5 4 4 4

0

1 2 3 4 5

6 7 8 9

10

11 12 13 14 15

16 17 18 19 20

21 22 23 24 25

26 27 28 29 30

31 & over

11.28% 11.28 11.28 11.28 11.28

5.04 5.04 5.04 5.04 5.04

5.04 5.04 5.04 5.04 5.04

4.00 4.00 4.00 4.00 4.00

4.00 4.00 4.00 4.00 4.00

4.00 4.00 4.00 4.00 4.00

4.00

1 Applicable when not eligible for service retirement.




Exhibit 11 Definitions

1. Actuarial Accrued Liability That portion, as determined by the particular actuarial

cost method used, of the Actuarial Present Value of future pension plan benefits as of the Valuation Date that is not provided for by the Actuarial Present Value of future Normal Costs.

2. Actuarial Assumptions Assumptions as to the occurrence of future events affecting pension costs, such as: mortality, termination, disablement and retirement; changes in compensation; rates of investment earnings and asset appreciation; and other relevant items.

3. Actuarially Equivalent

Of equal Actuarial Present Value, determined as of a given date with each value based on the same set of Actuarial Assumptions.

4. Actuarial Gain (Loss) A measure of the difference between actual experience and that expected based on the Actuarial Assumptions during the period between two Actuarial Valuation dates, as determined in accordance with the particular actuarial cost method used.

5. Actuarial Present Value The value of an amount or series of amounts payable or receivable at various times, determined as of a given date (the Valuation Date) by the application of the Actuarial Assumptions.

6. Actuarial Valuation The determination, as of a Valuation Date, of the Normal Cost, Actuarial Accrued Liability, Actuarial Value of Assets and related Actuarial Present Values for a pension plan.

7. Actuarial Value of Assets The value of cash, investments and other property belonging to a pension plan, as determined by a method and used by the actuary for the purpose of an Actuarial Valuation.




8. Entry Age Actuarial Cost Method

An actuarial cost method under which the Actuarial Present Value of the Projected Benefits of each individual included in the Actuarial Valuation is allocated as a level percentage of earnings between entry age and assumed termination. The portion of this Actuarial Present Value allocated to a valuation year is called the Normal Cost. The portion of this Actuarial Present Value not provided for at a Valuation Date by the Actuarial Present Value of future Normal Costs is called the Actuarial Accrued Liability. Under this method, Actuarial Gains (Losses), as they occur, reduce (increase) the Unfunded Actuarial Accrued Liability.

9. Plan Year A 12-month period beginning January 1 and ending December 31.

10. Normal Cost That portion of the Actuarial Present Value of pension plan benefits that is allocated to a valuation year by the actuarial cost method.

11. Projected Benefits Those pension plan benefit amounts that are expected to be paid at various future times according to the Actuarial Assumptions, taking into account such items as the effect of advancement in age and past and anticipated future qualified service.

12. Overfunded Actuarial Accrued Liability

The excess, if any, of the Actuarial Value of Assets over the Actuarial Accrued Liability.

13. Unfunded Actuarial Accrued Liability

The excess, if any, of the Actuarial Accrued Liability over the Actuarial Value of Assets.

14. Valuation Date The date upon which the Normal Cost, Actuarial Accrued Liability and Actuarial Value of Assets are determined. Generally, the Valuation Date will coincide with the end of a Plan Year.

15. Years to Amortize the Unfunded Actuarial Accrued Liability

The period is determined in each Actuarial Valuation as the number of years, beginning with the Valuation Date, to amortize the Unfunded Actuarial Accrued Liability with a level percent of payroll that is the difference between the expected total contribution rate and the Normal Cost contribution rate.




Exhibit 12

Summary of Present Plan 1. Normal Service and Disability Retirement Monthly Benefit is the greater of the Formula 1 Amount or the Formula 2 Amount (a) Formula 1 Amount is (i) plus (ii) (i) Percent of Highest 60-Month Average Pay 50.80% (ii) Additional benefit for each year of service in excess of 20 years $137.00 (b) Formula 2 Amount is for each year of service $137.00 (c) Five-Year Phase-in to Formula 1 from Formula 2 applies for retirement dates or RETRO DROP benefit calculation dates between July 1, 2007 and June 30, 2012 when Formula 1 Amount exceeds Formula 2 Amount 2. Normal Service Retirement Eligibility (a) Minimum age Age 54 (b) Minimum service 20 Years 3. RETRO DROP Eligibility (a) Earliest RETRO DROP benefit calculation date Age 54 and 20 Years (b) Earliest employment termination date with maximum RETRO DROP accumulation period Age 57 and 23 Years 4. Maximum Length of RETRO DROP Benefit Accumulation Period 36 Months 5. Actuarially Equivalent Early Retirement Eligibility (Reduced Benefit Begins Immediately) 10 Years 6. Vested Terminated Benefit (a) Eligibility 10 Years (b) Percent vested with 10 years 50% (c) Additional percent vested for each year above 10 years 5% (d) Percent vested with 20 or more years 100% (e) Benefit is deferred to date person would have satisfied normal service retirement eligibility (f) Benefit is percent vested times normal service benefit




7. Disability Retirement Monthly Benefit (a) For initial 30-month period, is (i) plus (ii) (i) Minimum monthly amount based on 20 years (ii) Additional monthly amount per year of service in excess of 20 years (b) Following initial 30-month period, is the greater of (i) and (ii) (i) Initial benefit reduced by the portion of the initial benefit equal to estimated annual residual earning capacity divided by annual base earnings (ii) Initial benefit multiplied by percentage of disability 8. Surviving Spouse Monthly Death Benefit for Firefighters Who Die while Employed (a) Minimum monthly amount based on 20 years (b) Additional monthly amount per year of service in excess of 20 years (c) Surviving spouse may elect RETRO DROP if firefighter was eligible for a service retirement benefit at time of death 9. The normal form of annuity payment at retirement is a Joint and 100% to Surviving

Spouse, and payment is the last day of each month. The same benefit payable to the retired firefighter is payable to the surviving spouse as long as the spouse is alive (and does not remarry if the firefighter terminated employment as a firefighter prior to February 25, 1997). If there is no surviving spouse or the surviving spouse is ineligible, the death benefit shall be paid to the guardian of the deceased firefighter’s dependent children, if any.

10. Pay used to determine the Highest 60-Month Average Pay includes all pay except for

unused sick leave, unused vacation, unused comp time, or injury pay. The average is based on the 130 consecutive biweekly pay periods during which covered pay was highest. Any lump sum payment for a retroactive pay increase will be allocated to the applicable past biweekly pay periods and excluded from pay for the biweekly pay period in which it was actually paid.

11. Refund of firefighters’ accumulated contributions without interest will be made to

firefighters who terminate employment and either are not eligible for any other benefit from the system or request a refund from the system.

12. Contributions (a) Firefighters (percent of covered pay) 12.20% (b) City of Corpus Christi (percent of covered payroll) 20.78%




Exhibit 13 Disclosures in Accordance with GASB Statement No. 25

Required Supplementary Information for the System’s Financial Statement for Fiscal Year Ending December 31, 2013

I. Schedule of Funding Progress

Actuarial Valuation

Date

Actuarial Value of Assets

(a)

Entry Age Actuarial Accrued Liability (AAL)

(b)

Unfunded AAL

(UAAL) (b - a)

Funded Ratio (a ÷ b)

Annual Covered Payroll1

(c)

UAAL as a Percentage of Covered

Payroll (b - a) ÷ c

12/31/082,3 12/31/104,5 12/31/124

$ 92,218,756 104,079,845 105,753,324

$162,568,260 177,565,330 192,269,360

$70,349,504 73,485,485 86,516,036

56.7% 58.6 55.0

$24,268,094 27,723,867 29,459,098

289.9% 265.1 293.7

1 The covered payroll is based on estimated annual salaries for the year following the valuation date. 2 Reflects plan provisions effective July 1, 2007. 3 The actuarial value of assets method and the mortality assumption were revised. 4 Reflects plan provisions effective June 1, 2010. 5 The mortality assumption was revised.

II. Schedule of Employer Contributions

Plan Year

Ended 12/31

Actual Contributions Annual Required Contributions

(ARC)1 Percent of ARC

Contributed

As a Percent of Covered Payroll

Dollar Amount Date AP Rate

2005 2006 2007 2008 2009 2010 2011 2012 2013

12.0%/12.5% 12.5%

12.50%/14.58% 15.39% 16.58% 17.68% 18.78% 20.13% 20.78%

$2,759,284 2,748,150 3,308,020 3,705,092 4,251,377 4,711,698 5,060,580 5,654,358 ________2

12/31/04 12/31/05 12/31/06 12/31/063 12/31/08 12/31/08 12/31/10 12/31/10 12/31/12

23 23 25 30 30 30 30 30 30

12.0%/12.5% 12.5%

12.50%/14.58% 17.92% 18.85% 18.85% 17.72% 17.72% 19.65%

100.0% 100.0 100.0 85.9 88.0 93.8 106.0 113.6 105.8

1 The ARC is based on the biennial actuarial valuation as of the date (“Date”). A biennial actuarial

valuation is the basis for the ARC in each of the two plan years immediately following the valuation date. The ARC is expressed as a contribution rate (“Rate”) that is a percent of covered payroll. An amortization period (“AP”) associated with the ARC of up to 40 years was compliant with GASB parameters through the 2006 plan year. After the 2006 plan year, an AP of up to 30 years is compliant.

2 The system should disclose the actual city contributions during 2013. 3 The ARC for the 2008 plan year was based on the special study of the plan effective July 1, 2007 based on

the December 31, 2006 actuarial valuation.




Exhibit 13 (continued) III. Notes to Required Supplementary Information

The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows.

Valuation date December 31, 2012 Actuarial cost method Entry age Amortization method Level percentage of projected payroll, open Amortization period for ARC 30 years Asset valuation method Market value smoothed by a 5-year deferred recognition method with an 80%/120% corridor on market Actuarial assumptions:

Investment rate of return, net of expenses 8% per year Inflation 4% per year Projected salary increases - general salary increase 4% per year - promotion and longevity increase 0% to 7.28% per year - total increase 4% to 11.28% per year Payroll growth rate 4% per year Postretirement cost-of-living adjustments None

IV Actuarial Information Needed for Notes to the Financial Statement

as Required by Paragraph 32 of GASB 25 A. Plan Description The Board of Trustees of the Corpus Christi Fire Fighters’ Retirement System is the

administrator of a single-employer defined benefit pension plan. This pension system is a trust fund. Firefighters in the Corpus Christi Fire Department are covered by the Corpus Christi Fire Fighters’ Retirement System. The table below summarizes the membership of the system reflected in the actuarial valuation as of December 31, 2012, the most recent biennial actuarial valuation.

1. Retirees and beneficiaries currently receiving benefits and terminated employees entitled to benefits but not yet receiving them 313

2. Current employees a. Vested 128 b. Partially vested 118 c. Nonvested 162 3. Total 721




Exhibit 13 (continued) The Corpus Christi Fire Fighters’ Retirement System provides service retirement,

death, disability, and withdrawal benefits. These benefits fully vest after 20 years of credited service. Firefighters may retire at age 54 with 20 years of service. A reduced early service retirement benefit or deferred service retirement benefit is provided for employees who terminate employment with 10 or more years of service. The plan effective June 1, 2010 provides a monthly service retirement benefit payable in a Joint and 100% to Spouse form of annuity. The monthly benefit equals the greater of (1) 50.8% of Highest 60-Month Average Pay plus $137.00 per month for each year of service in excess of 20 years and (2) $137.00 for each year of service. There was a five-year phase-in of the percent of pay formula.

A firefighter has the option to participate in a Retroactive Deferred Option Plan

(RETRO DROP) which will provide a lump sum benefit and a reduced annuity upon termination of employment. Firefighters must be at least age 54 with 20 years of service at the selected “RETRO DROP benefit calculation date” (which is prior to date of employment termination).

There is no provision for automatic postretirement benefit increases. The system has the authority to provide, and has periodically in the past provided, ad hoc postretirement benefit increases. The benefit provisions of this plan are authorized by the Texas Local Fire Fighters’ Retirement Act (TLFFRA). TLFFRA provides the authority and procedure to amend benefit provisions.

B. Contributions Required and Contributions Made The contribution provisions of this plan are authorized by TLFFRA. TLFFRA

provides the authority and procedure to change the amount of contributions determined as a percentage of pay by each firefighter and a percentage of payroll by the city.

While the contribution requirements are not actuarially determined, state law requires that each plan of benefits adopted by the system must be approved by an eligible actuary. The actuary certifies that the contribution commitment by the firefighters and the city provides an adequate contribution arrangement. Using the entry age actuarial cost method, the plan’s normal cost contribution rate is determined as a percentage of payroll. The excess of the total contribution rate over the normal cost contribution rate is used to amortize the plan’s unfunded actuarial accrued liability (UAAL), and the number of years needed to amortize the plan’s UAAL is determined using a level percentage of payroll method.




Exhibit 13 (continued) The costs of administering the plan are paid from the system. The funding policy of the Corpus Christi Fire Fighters’ Retirement System requires

contributions equal to 12.2% of pay by the firefighters and contributions by the City of Corpus Christi of 20.78% of payroll beginning in calendar year 2013 and continuing at that rate in subsequent years.




Exhibit 14 Disclosures in Accordance with GASB Statement No. 27

Notes to the Financial Statements for the City of Corpus Christi for the Fiscal Year Ending July 31, 2013

I. Annual Pension Cost For the fiscal year ending July 31, 2013, the City of Corpus Christi’s Annual Pension Cost (APC) for the Corpus Christi Fire Fighters’ Retirement System is $__________, an amount described below in item 4 of the Development of the Net Pension Obligation. Based on the results of the December 31, 2012 actuarial valuation of the Plan Effective June 1, 2010, the most recent actuarial valuation, the Board’s actuary found that the system has an adequate contribution arrangement based on the current level of the firefighter and the assumed City of Corpus Christi contribution rates. The current funding policy of the system requires the firefighters to contribute 12.20% of pay and city contributions that were 20.13% of payroll for calendar year 2012 and 20.78% of payroll beginning in calendar year 2013 and continuing at that rate in subsequent years. The annual required contributions (ARC) by the city for the fiscal year ending July 31, 2013 were based on the results of the actuarial valuations as of December 31, 2010 and as of December 31, 2012 which were determined in compliance with the GASB Statement No. 27 parameters. The actuarial methods and assumptions used for the two most recent valuations are shown below:

Valuation date 12/31/2010 12/31/2012 Actuarial cost method Entry age Entry age Amortization method Level percent of Level percent of payroll, open payroll, open Amortization period for ARC 30 years 30 years Asset valuation method 5-year adjusted 5-year adjusted market value market value Actuarial assumptions • Investment return 8.00% per year 8.00% per year • Inflation 4.00% per year 4.00% per year • Projected salary increases

- general salary increase 4% per year 4% per year - promotion and longevity increase 0%-7.28% per year 0%-7.28% per year - total increase 4%-11.28% per year 4%-11.28% per year

• Cost-of-living increases 0% 0% • Payroll increases 4% 4% ARC as percent of payroll 17.72% 19.65%

Fiscal years 2012 and 2013 2013, 2014 and 2015




Exhibit 14 (continued)

Development of the Net Pension Obligation (NPO) as of July 31, 2013: 1. Annual Required Contributions (ARC) $ 1 2. Interest on NPO + 2 3. Adjustment to ARC - 3 4. Annual Pension Cost (APC) (1 plus 2 minus 3) $ 5. Actual City Contributions Made - 4 6. Increase (Decrease) in NPO (subtract 5 from 4) $ 7. NPO at Beginning of Fiscal Year + 8. NPO at End of Fiscal Year (sum of 6 and 7) $ 1 The ARC equals 17.72% of payroll from August 1, 2012 through December 31, 2012 plus 19.65% of

covered payroll for the period January 1, 2013 through July 1, 2013. 2 In accordance with paragraph 12 of GASB 27, one year’s interest on the NPO as of August 1, 2012

should be determined based on the actuarial investment return assumption in the applicable actuarial valuations, which was 8% per year in both applicable valuations.

3 The adjustment to the ARC should be determined in accordance with Paragraphs 12 and 13 of GASB 27 based on the amortization factor in the applicable actuarial valuations, which was 18.2974 in both applicable valuations.

4 The actual city contributions made to the system during the fiscal year August 1, 2012 through July 31, 2013 should be disclosed and used in the determination of the NPO.

II. Trend Information

Fiscal Year

Ending

Annual Pension

Cost (APC)

Actual City

Contributions

Percentage of APC

Contributed

Net Pension

Obligation 07/31/2011 07/31/2012 07/31/2013

$ 1

$ 1 $ 2

$ 1

$ 1 $ 3

1

1 4

$ 1

$ 1 $ 5

1 The city should disclose the applicable information previously reported for fiscal years ending July 31, 2011 and 2012.

2 The APC is determined in item 4 of the NPO development above. 3 The city should disclose the actual city contributions made to the system during the fiscal year ending

July 31, 2013. 4 The percentage of APC contributed is determined as the actual city contributions divided by the APC. 5 The NPO is determined in item 8 of the NPO development above.




Exhibit 14 (continued)

III. Schedule of Funding Progress

Actuarial Valuation

Date

Actuarial Value of Assets

(a)

Entry Age Actuarial Accrued Liability (AAL)

(b)

Unfunded AAL

(UAAL) (b - a)

Funded Ratio (a ÷ b)

Annual Covered Payroll1

(c)

UAAL as a Percentage of Covered

Payroll (b - a) ÷ c

12/31/082,3 12/31/104,5 12/31/124

$ 92,218,756 104,079,845 105,753,324

$162,568,260 177,565,330 192,269,360

$70,349,504 73,485,485 86,516,036

56.7% 58.6 55.0

$24,268,094 27,723,867 29,459,098

289.9% 265.1 293.7

1 The covered payroll is based on estimated annual salaries for the year following the valuation date. 2 Reflects plan provisions effective July 1, 2007. 3 The actuarial value of assets method and the mortality assumption were revised. 4 Reflects plan provisions effective June 1, 2010. 5 The mortality assumption was revised.

IV. Actuarial Information Needed for Notes to the Financial Statement as Required by Paragraph 20 of GASB 27

A. Plan Description

The Board of Trustees of the Corpus Christi Fire Fighters’ Retirement System is the administrator of a single-employer defined benefit pension plan. This pension system is a trust fund. Firefighters in the Corpus Christi Fire Department are covered by the Corpus Christi Fire Fighters’ Retirement System.

The Corpus Christi Fire Fighters’ Retirement System provides service retirement,

death, disability, and withdrawal benefits. These benefits fully vest after 20 years of credited service. Firefighters may retire at age 54 with 20 years of service. A reduced early service retirement benefit or deferred service retirement benefit is provided for employees who terminate employment with 10 or more years of service. The plan effective June 1, 2010 provides a monthly service retirement benefit payable in a Joint and 100% to Spouse form of annuity. The monthly benefit equals the greater of (1) 50.8% of Highest 60-Month Average Pay plus $137.00 per month for each year of service in excess of 20 years and (2) $137.00 for each year of service. There was a five-year phase-in of the percent of pay formula.

A firefighter has the option to participate in a Retroactive Deferred Option Plan

(RETRO DROP) which will provide a lump sum benefit and a reduced annuity upon termination of employment. Firefighters must be at least age 54 with 20 years of service at the selected “RETRO DROP benefit calculation date” (which is prior to date of employment termination).




Exhibit 14 (continued) There is no provision for automatic postretirement benefit increases. The system has

the authority to provide, and has periodically in the past provided, ad hoc postretirement benefit increases. The benefit provisions of this plan are authorized by the Texas Local Fire Fighters’ Retirement Act (TLFFRA). TLFFRA provides the authority and procedure to amend benefit provisions.

B. Contributions Required and Contributions Made

The contribution provisions of this plan are authorized by TLFFRA. TLFFRA provides the authority and procedure to change the amount of contributions determined as a percentage of pay by each firefighter and a percentage of payroll by the city.

While the contribution requirements are not actuarially determined, state law requires

that each plan of benefits adopted by the system must be approved by an eligible actuary. The actuary certifies that the contribution commitment by the firefighters and the city provides an adequate contribution arrangement. Using the entry age actuarial cost method, the plan’s normal cost contribution rate is determined as a percentage of payroll. The excess of the total contribution rate over the normal cost contribution rate is used to amortize the plan’s unfunded actuarial accrued liability (UAAL), and the number of years needed to amortize the plan’s UAAL is determined using a level percentage of payroll method.

The costs of administering the plan are paid from the system. The funding policy of the Corpus Christi Fire Fighters’ Retirement System requires

contributions equal to 12.2% of pay by the firefighters and contributions by the City of Corpus Christi that were 20.13% of payroll for calendar year 2012 and are 20.78% of payroll beginning in calendar year 2013 and continuing at that rate in subsequent years.

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