Pension Plans (continued)

56 

Note 7. Pension Plans (continued)

Each pension plan has its own board that acts as plan administrator and trustee. Each plan’s assets may only be used for the payment of benefits to the members and beneficiaries of the plan in accordance with the terms of each plan document. The costs of administering each plan are financed in the appropriate pension trust fund.

The Florida Constitution requires local governments to make the actuarially determined contribution. The Florida Division of Retirement reviews and approves each local government’s actuarial report for funding purposes.

Additionally, the State collects two locally authorized insurance premium surcharges (one for the Police Pension Plan on casualty insurance policies and one for the Fire Pension Plan on certain real and personal property insurance policies within the corporate limits) which can only be distributed after the State has ascertained that the local government has met their actuarial funding requirement for the then most recently completed fiscal year.

Basis of Accounting:

The Plan’s financial statements are prepared using the accrual basis of accounting. Employee contributions are recognized in the period in which the contributions are due. Employer and State of Florida contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the Plans.

Investments:

Investments are reported at fair value and are managed by third party money managers. The Plans’ independent custodians and individual money managers price each instrument using various third party pricing sources. The benefits and refunds of the defined benefit pension plans are recognized when due and payable in accordance with the terms of the plan.

Actuarial Assumptions:

The following schedule is derived from the respective actuarial reports and City information for the three pension plans as part of the actuarial valuation pertaining to the year ended September 30, 2011.

General

Employees’ Police Fire Asset Valuation:

Reporting Fair value Fair value Fair value

Actuarial Valuation 4-year smoothed ⁽¹⁾ 4-year smoothed

Legal Reserves None None None

Long-Term Receivable None None None

Internal/Participant Loans None None None

Membership and Plan Provisions:

Note 7. Pension Plans (continued)

General

Employees’ Police Fire Actuarial Valuation Date 10/1/2009 10/1/2009 09/30/2009 Asset Valuation Method 4-year smoothed

market

(1) 4-year smoothed market Actuarial Methods:

Actuarial Cost Method Aggregate Cost

Entry age Normal

Projected Unit Credit Amortization Method Level percent of pay,

open

(1) Effective October 1, 2006, the asset valuation method was changed from the five year smoothed method to a method that recognizes 20% of the difference between market value of assets and expected actuarial asset value.

(2) 1.0% for age 53, 2% for age 54, and 3% over age 55.

Annual Pension Cost and Net Pension Asset

The City’s annual pension cost and net pension asset for the Police Pension for the current year was as follows:

Annual Required Contributions (ARC) $ 4,298,216 Interest on net pension asset (15,858) Adjustment to annual required contribution 26,320

Annual Pension Cost (APC) 4,308,678

The City’s annual required contribution and actual contributions for each plan for the last three fiscal years ended September 30, is shown below. The 2011 required contributions were determined as part of the actuarial valuation pertaining to year ended September 30, 2011, for each plan:

Three Year Trend Information

58 

Note 7. Pension Plans (continued)

Three Year Trend Information

The schedule of funding progress presents information about the actuarial value of plan assets relative to the actuarial accrued liability for the year ended September 30, 2011.

Schedule of Funding Progress

10/1/2009 36,834,622 65,550,027 28,715,405 56.20% 9,290,829 309.10%

Fire Pension

09/30/2009 26,484,000 44,357,000 17,873,000 59.71% 9,994,000 178.84%

The required Schedule of Funding Progress immediately following the notes to the financial statements presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.

The General Employees Pension does not issue separate stand-alone financial statements, therefore, included below is the financial information for the Plan as of and for the year ended September 30, 2011:

General Employees Pension Trust Fund Assets:

Cash and cash equivalents $ 33,888

Investments 1,848,769

Receivables 31,783

Total assets 1,914,440

Liabilities:

Accounts payable 941

Net assets held in trust for pension benefits $ 1,913,499 Additions:

Contributions:

Employer $ 125,273

Employees 9,900

Total contributions 135,173

Note 7. Pension Plans (continued)

General Employees Pension Trust Fund (continued) Investment earnings (loss):

Net appreciation in the fair value of investments $ 32,337

Less investment expenses (4,084)

Net investment earnings 28,253

Total additions 163,426

Net assets, beginning 2,023,189

Net assets, ending $ 1,913,499

Defined Contribution Plan

The City of Palm Beach Gardens Money Purchase Plan (the “General Plan”) and the City of Palm Beach Gardens Executive Plan (the “Executive Plan”) are defined contribution pension plans established by the City and administered by ICMA Retirement Corporation to provide benefits at retirement to the employees of the City. The General Plan was closed to new employees hired on or after October 1, 2006.

Employees of the City that were hired prior to October 1, 2006, and elected not to join the FRS are eligible to participate in the General Plan. The City contributes to the General Plan an amount equal to the FRS contribution rate at the time of election (9.85% general employee and 13.12% senior management) of the employee’s base salary each month. Employees also contribute an amount equal to 4% of their base salary in the General Plan.

The City’s contributions for each employee (and interest allocated to the employees’ accounts) are fully vested after one year of continuous service. Plan revisions and contribution requirements are established and may be amended by the City Council.

The City Manager is the only employee eligible to participate in the Executive Plan. The City contributes 15% to the Executive Plan. As part of the employment agreement with the City Manager, the City contributes 3% of the base salary to the Executive Plan, in addition to the 15%.

The City’s contributions were calculated using the base salary amount of $1,458,000 for the General Plan and

$201,425 for the Executive Plan. The City made its required contributions of $152,705 for the General Plan and

$36,256 for the Executive Plan and employees made their required contributions of $58,320 to the General Plan.

Deferred Compensation Plan

The City offers its employees deferred compensation plans created in accordance with Internal Revenue Service Code Section 457. This plan, available to all City employees, permits them to defer the payment of a portion of their salary until future years. Participation in this plan is voluntary and the City makes no contributions to these plans on behalf of the employee. The deferred compensation is not available to employees until termination, retirement, death, or unforeseen emergency. All amounts of compensation deferred, including the investments and earnings thereon, vest with the employee and are not subject to the claims of the City’s general creditors.