COPERS

1
COPERS
City of Phoenix Retirees' Association

• City of Phoenix Employees Retirement System

March 2009
2
Agenda

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

3
Agenda

• Post-Retirement Increases
• PEP
• 13th Check
• Calculation Process
• Status
• Future Outlook
• Questions

4
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

5
Economic Overview Ryan Harvey, RV Kuhns
Assoc.
Returns as of December 31, 2008 Returns as of December 31, 2008 Returns as of December 31, 2008
One Year 5 Years Annualized
Large Company Stocks SP 500 -37.00 -2.19
Small Company Stocks Russell 2000 -33.79 -0.93
International Stocks MSCI EAFE -43.06 2.10
Corporate Govt Bonds BC aggregate 5.24 4.65
Real Estate NCREIF Property -6.46 11.67
6
COPERS Financial Condition

• Funded Status
• Employer Contributions

7
Funded Ratio
8
History of Contributions
Employee Contribution 5 per charter
9
Post-Retirement Increases

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

10
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

11
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 increase or percentage
  supported by excess returns reserve
• Based on excess investment returns reserve

12
PEP Pension Increases Calculation Process

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

2004 10.44
2005 6.74
2006 12.10
2007 7.85
2008 -25.88
Average 2.25
13
Average Rate of return (5 cal year)
14
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

15
Average Rate of return (5 cal year)
Actuarial Return Target 8
16
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

17
PEP
18
PEP Pension Increases Calculation Process

• (4) Phoenix-Mesa CPI for prior year

2004 1.8
2005 2.9
2006 3.0
2007 3.4
2008 3.5
(5) PEP is lesser of CPI or amount supported by
reserve balance 1.7
19
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

20
Pension Equalization Program (PEP)
10yr Cumulative 26.6 10yr Average 2.7
21
13th Check Pension Increases Calculation
Process

• (1) Phoenix-Mesa CPI for prior year

2004 1.8
2005 2.9
2006 3.0
2007 3.4
2008 3.5
22
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

23
13th Check
Minimum rate per amended City Charter
24
Future Outlook for Post-Retirement Increases

• PEP Reserve
• Investment/Economic Conditions

25
Questions?
26
COPERS
City of Phoenix Retirees' Association

• City of Phoenix Employees Retirement System

March 2009