COPERS

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COPERS
City of Phoenix Retirees' Association

• City of Phoenix Employees Retirement System

March 2011
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Agenda

• Economic Overview
• COPERS Financial Condition
• Funded Status
• Employer Contributions

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Agenda

• Post-Retirement Increases
• PEP
• 13th Check
• Calculation Process
• Status
• Future Outlook
• Update on Pension Reform Task Force
• Questions

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Economic Market Overview Ryan Harvey, R.V.
Kuhns Associates, Inc.

• 2010
• Equity market rebound continued
• Additional U.S. Government stimulus
• Federal Reserve maintained historically low rates
• U.S. economy officially entered into the current
  economic recovery, following a 18-month long
  recession that ended June 2009

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Economic Market Overview Ryan Harvey, R.V.
Kuhns Associates, Inc.

• Generally Improving Economic Indicators
• Positive
• Unemployment Rate 9.7 ? 9.4
• GDP Growth 0.2 ? 3.3 (9/30/2010)
• Leading Economic Index 106.2 ? 112.4
• Coincident Economic Index 100.0 ? 101.9
• Neutral
• Inflation Expectations 2.4 ? 2.3
• Negative
• Consumer Confidence Index 53.6 ? 52.5

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Economic Market Overview Ryan Harvey, R.V.
Kuhns Associates, Inc.
Returns as of December 31, 2010 Returns as of December 31, 2010 Returns as of December 31, 2010 Returns as of December 31, 2010
1 Year 2 Years Cumulative 3 Years Cumulative 5 Years Annualized
Large Company Stocks SP 500 15.06 45.51 -8.32 2.29
Small Company Stocks Russell 2000 26.86 61.33 6.82 4.47
International Stocks MSCI EAFE 8.21 43.33 -18.38 2.94
Corporate Govt Bonds BC Aggregate 6.54 12.86 18.77 5.80
Real Estate NCREIF Property 13.11 -5.96 -12.04 3.51
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COPERS Financial Condition

• Funded Status
• Employer Contributions

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Funded Ratio
Aggregate 2009 Funding Level for Public Funds
79.8
Source NASRA Public Funds Survey
Valuation Date (June 30/December 30)
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History of Contributions
Employee Contribution 5 per charter
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Post-Retirement Increases

• PEP
• 13th Check
• Calculation Process
• Status
• Future Outlook

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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 years CPI increase or 3
  minimum of 1 if excess returns reserve balance
  sufficient
• Based on excess investment returns reserve

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Pension Increases

• PEP
• Permanent increase
• Eligible if retired 36 months by January 1st
• Paid with April pension payment retroactive to
  January
• Lesser of prior years CPI (not less than zero)
  or percentage supported by excess returns reserve
• Based on excess investment returns reserve

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PEP Pension Increases Calculation Process

• (1) Determine Investment Earnings
• Average over last five calendar years

2006 12.10
2007 7.85
2008 -25.88
2009 13.77
2010 12.65
Average 4.10
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Average Rate of return (5 cal year)
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PEP Pension Increases Calculation Process

• (2) Are there Excess Earnings?
• Earnings over 8
• Rate is in Charter
• Equals the target rate used by actuary
• 2006-2010 Average 4.10

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Average Rate of return (5 cal year)
Actuarial Return Target 8
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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
• 2011 No addition, minimal balance exists
• Determine increase supported by reserve balance
  0.05

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PEP
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PEP Pension Increases Calculation Process

• (4) Phoenix-Mesa CPI for prior year

2006 3.0
2007 3.4
2008 3.5
2009 2010 -1.4 0.6
(5) PEP is lesser of CPI (not less than zero) or
amount supported by reserve balance
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2011 PEP Calculation

• Five Year Investment Earnings 4.10
• (2) Excess Earnings? No
• (3) Deposit to PEP Reserve? No
• Increase supported by Reserve 0.05
• (4) Phoenix-Mesa CPI for 2010 0.6
• (5) 2011 PEP ? No

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Pension Equalization Program (PEP)
10 year Cumulative 19.90 10 year Average 1.99
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13th Check Pension Increases Calculation
Process

• (1) Phoenix-Mesa CPI for prior year

2006 3.0
2007 3.4
2008 3.5
2009 -1.4
2010 0.6
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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 0.6 / 2 0.3
• PEP Reserve Minimal
• 2011 13th Check Unlikely

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13th Check
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Future Outlook for Post-Retirement Increases

• PEP Reserve
• Investment/Economic Conditions

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Update on Pension Reform Task Force - Rick
Naimark, Deputy City Manager

• Membership
• Charge and timeline
• Next steps
• Pension Consulting Services
• Legal Services

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Questions?