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City of Phoenix Retirees' Association. COPERS. C ity o f P hoenix E mployees’ R etirement S ystem. March 2009. Agenda. Economic Overview COPERS’ Financial Condition Funded Status Employer Contributions. Agenda. Post-Retirement Increases PEP 13th Check Calculation Process

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copers

City of Phoenix

Retirees' Association

COPERS

City of Phoenix Employees’ Retirement System

March 2009

agenda
Agenda
  • Economic Overview
  • COPERS’ Financial Condition
    • Funded Status
    • Employer Contributions
agenda3
Agenda
  • Post-Retirement Increases
    • PEP
    • 13th Check
    • Calculation Process
    • Status
    • Future Outlook
  • Questions
economic overview ryan harvey rv kuhns assoc
Economic Overview – Ryan Harvey, RV Kuhns & Assoc.
  • 2008
    • Market Volatility
    • U.S. Government Banking Plan
    • Federal Reserve cut rates
  • December 31, 2008 Unemployment Rate = 7.2%
    • 4.9% at beginning of 2008
  • U.S. economy officially entered into a recession during late 2007
copers financial condition
COPERS’ Financial Condition
  • Funded Status
  • Employer Contributions
history of contributions
History of Contributions

Employee Contribution 5% per charter

post retirement increases
Post-Retirement Increases
  • PEP
  • 13th Check
  • Calculation Process
  • Status
  • Future Outlook
pension increases
13th Check

One time payment

Eligible if retired by June 30th of payment year

Paid with December pension payment

Lesser of ½ of prior year’s CPI increase or 3%; minimum of 1%; if excess returns reserve balance sufficient

Based on excess investment returns reserve

Pension Increases
pension increases11
Pension Increases

PEP

  • Permanent increase
  • Eligible if retired 36 months by January 1st
  • Paid with April pension payment retroactive to January
  • Lesser of prior year’s CPI increase or percentage supported by excess returns reserve
  • Based on excess investment returns reserve
pep pension increases calculation process
PEP Pension Increases – Calculation Process

(1) Determine Investment Earnings

Average over last five calendar years

pep pension increases calculation process14
PEP Pension Increases – Calculation Process

(2) Are there “Excess Earnings”?

  • Earnings over 8%
  • Rate is in Charter
  • Equals the target rate used by actuary
  • 2004-2008 Average = 2.25%
average rate of return 5 cal year15
Average Rate of return (5 cal year)

Actuarial Return Target = 8%

pep pension increases calculation process16
PEP Pension Increases – Calculation Process

(3) If yes, an amount is added to the “PEP Reserve”

  • A portion also goes to the retirement fund to help fund the general obligations of the fund
  • 2009 – No addition but balance exists due to previous activity
  • Determine increase supported by reserve balance = 1.7%
pep pension increases calculation process18
PEP Pension Increases – Calculation Process

(4) Phoenix-Mesa CPI for prior year

(5) PEP is lesser of CPI or amount supported by reserve balance

1.7%

2009 pep calculation
2009 PEP Calculation
  • Five Year Investment Earnings 2.25%
  • (2) Excess Earnings? No
  • (3) Deposit to PEP Reserve? No but PEP Reserve balance of approx. $15 million will support increase of 1.7%
  • (4) Phoenix-Mesa CPI for 2008 3.5%
  • (5) 2009 PEP 1.7%
pension equalization program pep
Pension Equalization Program (PEP)

10yr Cumulative: 26.6%

10yr Average: 2.7%

13th check pension increases calculation process22
13th Check – Pension Increases – Calculation Process

(2) 13th Check is lesser of ½ CPI or 3% with minimum of 1% if PEP Reserve balance is sufficient

  • ½ CPI = 3.5% / 2 = 1.75%
  • PEP Reserve = Unknown
    • Determined after payment of 2009 PEP + end of year adjustments
  • 2009 13th Check = Unknown
13th check
13th Check

*Minimum rate per amended City Charter

future outlook for post retirement increases
Future Outlook for Post-Retirement Increases
  • PEP Reserve
  • Investment/Economic Conditions
copers26

City of Phoenix

Retirees' Association

COPERS

City of Phoenix Employees’ Retirement System

March 2009