ACTUARIAL VALUATION REPORT

ACTUARIAL VALUATION REPORT AS OF JULY 1, 2009 FOR THE VIRGINIA PORT AUTHORITY DEFINED BENEFIT PENSION PLAN Aon Consulting 7325 Beaufont Springs Drive Suite 300 Richmond, Virginia 23225 September, 2009 CONTENTS OF REPORT DISCUSSION AND HIGHLIGHTS .................................................................................................... SUMMARY OF PLAN COSTS AND COVERAGE ................................................................................. SECTION 1. VALUATION RESULTS ..................................................................................... SECTION 1.1 ASSETS ................................................................................................ RECONCILIATION OF ASSETS................................................................ COMPOSITION OF ASSETS .................................................................... ALLOCATION OF ASSETS....................................................................... SECTION 1.2 CONTRIBUTIONS .................................................................................. DEVELOPMENT OF NORMAL COST ......................................................... EFFECTS OF PLAN CHANGES ................................................................. EFFECTS OF ASSUMPTION CHANGES ..................................................... SECTION 1.3 FINANCIAL STATEMENT INFORMATION ................................................. 1 3 5 6 6 7 8 9 10 12 13 15 25 26 29 29 30 33 34 35 37 38 SECTION 2. BASIS OF VALUATION ..................................................................................... SECTION 2.1 SECTION 2.2 SUMMARY OF PLAN PROVISIONS .......................................................... PLAN PARTICIPANTS ............................................................................. RECONCILIATION OF PLAN PARTICIPANTS ............................................ DISTRIBUTION OF ACTIVE PARTICIPANTS BY AGE AND SERVICE ....................................................................................... SECTION 2.3 ACTUARIAL BASIS ................................................................................ ACTUARIAL COST METHOD ................................................................... ACTUARIAL ASSUMPTIONS ................................................................... ASSUMPTION CHANGES ........................................................................ VALUATION OF ASSETS ........................................................................ DISCUSSION AND HIGHLIGHTS We have been retained by the Virginia Port Authority to perform an actuarial valuation of the Virginia Port Authority Defined Benefit Pension Plan as of July 1, 2009. The contents of this report reflect generally accepted actuarial principles. Plan In our valuation, we have made cost calculations based on the plan as effective July 1, 2009. A summary of the plan provisions is contained in Section 2.1 of this report. Recommended Contributions The contributions as developed in the July 1, 2009 valuation are as follows: Sworn and Non-Sworn VPA Participants Contribution Contribution as a Percentage of Covered Payroll $793,799 11.25% Sworn VRS Employees $317,364 80.13% The methods and assumptions used to calculate contributions are summarized in Section 2.3. Each assumption used in the valuation is reasonable taking into account the experience of the plan and reasonable expectations and represents our best estimate of anticipated experience under the plan. The plan was amended since the prior valuation to include 3 new retirees in the Non-Sworn group and to rollover assets to the Virginia International Terminals (VIT) Plan. The effect of these changes was an increase in the Present Value of Future Benefits of $122,387 and a decrease in the allocated assets of $772,336 for VPA-Sworn and Non-Sworn participants. The present value of future benefits and allocated assets for the VRS participants were unaffected by the change. See page 12 for details. Pension Expense and Disclosure We have calculated the amount of pension expense for the 2009/2010 fiscal year under Financial Accounting Standards Board Statement Numbers 87, 132, and 158 (SFAS 87/132/158). The derivation of pension expense is contained in Section 1.4. The discount rate used to determine the projected benefit obligation and accumulated benefit obligation is 6.82%. This rate is indicative of current rates in the annuity purchase market. The assumed long-term rate of return on assets is 8%. 1 The pension expense under SFAS 87/132/158 for the current and prior fiscal year is as follows: Fiscal Year Ending June 30, 2010 Net Periodic Pension Cost $1,225,573 Fiscal Year Ending June 30, 2009 $876,359 The undersigned are available to provide further information or answer any questions with respect to this report. __ 9-15-2009 Date Signed ___ ________________________________________ E. Lawrence McNamara, Jr., FSPA 2 SUMMARY OF PLAN COSTS AND COVERAGE Plan Year 2009/2010 Plan Coverage – VPA Non-Sworn Participants Number of Active Participants Total Payroll Average Pay Valuation Payroll Number of Vested Terminations Number of Retirees Average Years of Service (Actives) Average Age (Actives) Plan Coverage – VPA Sworn Participants Number of Active Participants Total Payroll Average Pay Valuation Payroll Number of Vested Terminations Number of Retirees Average Years of Service (Actives) Average Age (Actives) Plan Coverage – VRS Sworn Participants Number of Active Participants Total Payroll Average Pay Valuation Payroll Number of Vested Terminations Number of Retirees Average Years of Service (Actives) Average Age (Actives) 7 $396,061 56,580 396,061 1 31 23.3 57.1 11 $597,754 54,341 597,754 1 28 24.4 56.9 77 $3,373,474 43,811 3,373,474 2 2 5.0 46.0 73 $3,075,029 42,124 3,075,029 1 2 4.3 45.3 45 $3,682,514 81,834 3,682,514 14 4 6.2 42.9 51 $4,187,705 82,112 4,187,705 5 0 6.7 43.2 2008/2009 3 Plan Year 2009/2010 Accounting Information Pension Expense Projected Benefit Obligation, Beginning of Year Accumulated Benefit Obligation, Beginning of Year Fair Value of Assets Recommended Contributions Contribution for VPA Sworn and Non-Sworn Participants: a. Amount b. As a Percentage of Covered Payroll Contribution for VRS Sworn Participants: a. Amount b. As a Percentage of Covered Payroll $ 317,364 80.13% $ 259,963 43.49% $ 793,799 11.25% $ 509,118 7.01% $ 1,225,573 7,531,121 6,104,780 4,206,867 $ 876,359 6,433,273 5,028,851 5,227,855 2008/2009 4 SECTION 1 Valuation Results This section sets forth the results of the actuarial valuation. Section 1.1 shows the transactions of the plan's assets during the year and the composition of plan assets. Section 1.2 shows the computation of the recommended contribution amounts for VPA participants and VRS participants, respectively. Section 1.4 shows certain accounting information for the fiscal years ending June 30, 2009 and June 30, 2008. 5 SECTION 1.1 Assets Reconciliation of Assets, July 1, 2008 – July 1, 2009 1. 2. Assets at July 1, 2008 Contributions a. Employer Contribution for 2008/2009 Plan Year $5,227,855 1,185,944 3. Investment Increment a. Interest and Dividends b. Realized Appreciation (Depreciation) c. Unrealized Appreciation (Depreciation) d. Total Investment Increment 1,634 (511,736) (538,935) (1,049,037) 47,178 1,110,717 4,206,867 0 4,206,867 (21.9%) 4. 5. 6. 7. 8. 9. Expenses Benefit Payments Assets at June 30, 2009 (1.+2.+3d.-4.-5.) Employer Contribution Made for 2009/2010 Plan Year and Thereafter Valuation Assets at June 30, 2009 (6. – 7.) Net Rate of Return* Asset reconciliation is based on information furnished by the plan sponsor and UBS Fiduciary Trust Company. * To calculate the investment yield, current year employer contributions, benefit payments and expenses are assumed to be paid in the middle of the year. 6 Composition of Assets Market Value July 1, 2009 Amount Cash/Cash Equivalents Collective Trusts – Equity Collective Trusts – Bond and GIC USB Multi-Asset Fund Receivables Total $ 551,385 1,892,785 1,001,502 761,195 0 $4,206,867 % of Total 13.1% 45.0% 23.8% 18.1% 0% 100.0% July 1, 2008 Amount $ 561,053 2,402,781 1,327,038 936,983 0 $5,227,855 % of Total 10.7% 46.0% 25.4% 17.9% 0% 100.0% Receivables 0.0% UBS Multi-Asset Fund 18.1% Collective Trusts Bond & GIC 23.8% Cash/Cash Equivalents 13.1% Collective Trusts Equity 45.0% 7 Allocation of Assets VPA Sworn and NonSworn Participants Actuarial Value of Assets, July 1, 2008 Employer Contribution for 2008-2009 Plan Year Benefit Payments Net Investment Increment* Actuarial Value of Assets, July 1, 2009 $4,086,082 785,074 (806,939) (848,403) $3,215,814 VRS Sworn Participants $1,141,773 400,870 (303,778) (247,812) $ 991,053 Total $5,227,855 1,185,944 (1,110,717) (1,096,215) $4,206,867 * Allocated in the proportion that beginning balance, plus one-half of net contribution and benefit payments, bears to that for the total plan. 8 SECTION 1.2 Contributions – VPA Sworn and Non-Sworn Participants The contributions as developed in this section (assuming contributions are remitted as a percentage of payroll as participants are paid) are summarized as follows: Plan Year Beginning July 1, 2009 Recommended Contribution Recommended Contribution as a Percentage of Covered Payroll $793,799 11.25% July 1, 2008 $509,118 7.01% Contributions – VRS Sworn Participants The contributions as developed in this section (assuming contributions are remitted as a percentage of payroll as participants are paid) are summarized as follows: Plan Year Beginning July 1, 2009 Recommended Contribution Recommended Contribution as a Percentage of Covered Payroll $317,364 80.13% July 1, 2008 $259,963 43.49% 9 Development of Normal Cost VPA Sworn and Non-Sworn Participants July 1, 2009 1. Present Value of Benefits a. Active Non-Sworn Participants b. Active Sworn Participants c. Inactive Participants and Beneficiaries d. Total (a. + b. + c.) 2. 3. Actuarial Asset Value Present Value of Future Normal Costs (1d. - 2., but not less than $0) Present Value of Future Compensation Normal Cost Percentage (3. ÷ 4.) Valuation Payroll Normal Cost (5. x 6.) $4,591,268 5,787,610 764,708 July 1, 2008 $4,626,117 4,308,972 201,547 11,143,586 3,215,814 7,927,772 9,136,636 4,086,082 5,050,554 4. 5. 6. 7. 70,458,606 11.25% 7,055,988 $ 793,799 72,022,787 7.01% 7,262,734 $ 509,118 10 Development of Normal Cost – VRS Sworn Participants July 1, 2009 1. Present Value of Benefits a. Active Sworn Participants $ 283,025 2,395,002 2,678,027 991,053 1,686,974 2,105,210 80.13% 396,061 $ 317,364 July 1, 2008 $ 403,921 2,111,830 2,515,751 1,141,773 1,373,978 3,159,563 43.49% 597,754 $ 259,963 b. Inactive Participants c. 2. 3. 4. 5. 6. 7. Total (a.+b.) Actuarial Asset Value Present Value of Future Normal Costs (1.c. – 2., but not less than $0) Present Value of Future Compensation Normal Cost Percentage (3. ÷ 4.) Valuation Payroll Normal Cost (5. X 6.) 11 Effects of Plan Changes VPA Sworn and Non-Sworn Participants Old Plan 1. Present Value of Benefits a. Active Non-Sworn Participants b. Active Sworn Participants c. Inactive Participants and Beneficiaries d. Total (a. + b. + c.) 2. 3. Actuarial Asset Value Present Value of Future Normal Costs (1d. - 2., but not less than $0) Present Value of Future Compensation Normal Cost Percentage (3. ÷ 4.) Valuation Payroll Normal Cost (5. x 6.) $4,064,392 5,129,243 583,223 After VIT Asset Rollover Current Plan $4,064,392 5,129,243 583,223 $4,064,392 5,129,243 705,610 9,776,858 3,988,150 5,788,708 9,776,858 3,734,374 6,042,484 9,889,245 3,215,814 6,683,431 4. 5. 6. 7. 68,042,571 8.51% 7,055,988 $ 600,465 68,042,571 8.88% 7,055,988 $ 626,572 68,042,571 9.82% 7,055,988 $ 692,898 All results on this page are based on the actuarial assumptions from last year’s valuation including 1994 Group Annuity Table Mortality for healthy lives and an 8% interest rate. 12 Effects of Assumption Changes VPA Sworn and Non-Sworn Participants Old Assumptions 1. Present Value of Benefits a. Active Non-Sworn Participants b. Active Sworn Participants c. Inactive Participants and Beneficiaries d. Total (a. + b. + c.) 2. 3. Actuarial Asset Value Present Value of Future Normal Costs (1d. - 2., but not less than $0) Present Value of Future Compensation Normal Cost Percentage (3. ÷ 4.) Valuation Payroll Normal Cost (5. x 6.) $4,064,392 5,129,243 705,610 New Mortality 8% New Mortality 7.5% $4,092,900 5,208,221 707,249 $4,591,268 5,787,610 764,708 9,899,245 3,215,814 6,683,431 10,008,370 3,215,814 6,792,556 11,143,586 3,215,814 7,927,772 4. 5. 6. 7. 68,042,571 9.82% 7,055,988 $ 692,898 68,254,055 9.95% 7,055,988 $ 702,071 70,458,606 11.25% 7,055,988 $ 793,799 13 Effects of Assumption Changes VRS Sworn Participants Old Assumptions 1. Present Value of Benefits a. Active Sworn Participants b. Inactive Participants c. Total (a. + b.) 2. 3. Actuarial Asset Value Present Value of Future Normal Costs (1.c. – 2., but not less than $0) Present Value of Future Compensation Normal Cost Percentage (3. Valuation Payroll Normal Cost (5. X 6.) 4.) $264,830 2,300,965 2,565,795 991,053 1,574,742 New Mortality 8% New Mortality 7.5% $269,497 2,320,610 2,590,107 991,053 1,599,054 $283,025 2,395,002 2,678,027 991,053 1,686,974 4. 5. 6. 7. 2,065,071 76.26% 396,061 $ 302,036 2,074,974 77.06% 396,061 $ 305,205 2,105,210 80.13% 396,061 $ 317,364 14 Section 1.3 Financial Statement Information for FYE June 30, 2008 and June 30, 2009 Net Periodic Pension Cost Service Cost Interest Cost Expected Return on Assets Amortization of the Unrecognized Transition Obligation or (Asset) Recognized (gains) or losses Prior service cost recognized Gain or loss due to settlement or curtailment 6/30/2009 $ 655,361 435,006 (406,464) 0 93,796 98,660 0 6/30/2008 $ 642,254 356,456 (357,321) 0 85,479 73,615 0 Net periodic pension cost 876,359 800,483 Assumptions used for calculations of Net Periodic Pension Cost in “I” above: Weighted average discount rate Weighted average rate of compensation increase Weighted average expected long-term rate of return on plan assets 6.92% 4.00% 8.00% 6.25% 4.00% 8.00% 15 SFAS 158 Disclosure Discount Rate Funded Status Projected Benefit Obligation Plan Asset Value Funded Status Amount Recognized in the Statement of Financial Position Non-Current Assets Current Assets Non-Current Liabilities Total Amount Recognized in Accumulated Other Comprehensive Income Transition (Obligation) Asset Prior Service (Cost) Asset Net (Loss) Gain Total 6/30/2009 6.82% 6/30/2008 6.92% $(7,531,121 ) 4,206,867 (3,324,254 ) $(6,433,273 ) 5,227,855 (1,205,418 ) 0 0 (3,324,254 ) (3,324,254 ) 0 0 (1,205,418 ) (1,205,418 ) 0 (871,226 ) (4,256,372 ) (5,127,598 ) 0 (836,497 ) (1,862,680 ) (2,699,177 ) Accumulated Benefit Obligation Amount of Accumulated Benefit Obligation 6/30/2009 $6,104,780 6/30/2008 $5,028,851 16 Disclosure Prior to SFAS 158 (Accrued) Prepaid Pension Cost Accumulated Benefit Obligation Projected Benefit Obligation Fair Value of Assets Funded Status Unrecognized Transition Obligation Unrecognized Prior Service Cost Unrecognized Net (Gain)/Loss (Accrued) Prepaid Current Year, Prior to Additional Minimum Liability Additional Minimum Liability (Accrued) Prepaid Pension Cost Current Year Intangible Asset Accumulated Other Comprehensive Income Net Amount Recognized Assumptions Discount Rate Rate of Compensation Increases Reconciliation of (Accrued)/Prepaid Pension Cost (Accrued) Prepaid Prior Year Contributions Pension Cost for Year (Accrued) Prepaid Current Year, Prior to Additional Minimum Liability Current Year Additional Minimum Liability (Accrued) Prepaid Current Year 6/30/2009 6/30/2008 $(6,104,780) (7,531,121) 4,206,867 (3,324,254) 0 871,226 4,256,372 1,803,344 0 1,803,344 0 0 $1,803,344 $(5,028,851) (6,433,273) 5,227,855 (1,205,418) 0 836,497 1,862,680 1,493,759 0 1,493,759 0 0 $1,493,759 6.82% 4.00% 6.92% 4.00% $1,493,759 1,185,944 876,359 1,803,344 0 $1,803,344 $1,127,533 1,166,439 800,493 1,493,479 0 $1,493,479 17 Benefit Obligation Information Benefit Obligation at beginning of year Service Cost Interest Cost Contributions by plan participants Actuarial (gains) and losses Foreign currency exchange rate changes Benefits paid Plan Amendments Business combinations Divestitures, curtailments or settlements Special termination benefits Other Benefit Obligation at end of year 6/30/2009 $6,433,273 655,361 435,006 0 984,809 0 (1,110,717) 133,389 0 0 0 0 $7,531,121 6/30/2008 $5,833,592 642,254 356,456 0 (449,632) 0 (274,983) 325,586 0 0 0 0 $6,433,273 Fair Value of Plan Assets Plan assets at beginning of year 6/30/2009 $5,227,855 6/30/2008 $4,596,802 Actual return on assets Foreign currency exchange rate changes Contributions by employer Contributions by plan participants Benefits paid Business combinations Divestitures Settlements Other Plan assets at end of year (1,096,215) 0 1,185,944 0 (1,110,717) 0 0 0 0 $4,206,867 (260,403) 0 1,166,439 0 (274,983) 0 0 0 0 $5,227,855 18 RECONCILIATION Unrecognized prior service cost 1. 2. 3. 4. Unrecognized prior service cost 06/30/2008: Amortization for 2008-2009: Additional prior service cost at 6/30/2009 due to plan amendment: Unrecognized prior service cost 06/30/2009 (1.-2.+3.): $ 836,497 98,660 133,389 $ 871,226 Unrecognized loss/(gain) 1. 2. 3. 4. 5. Unrecognized loss/(gain) 06/30/2008: Amortization for 2008-2009: Net loss/(gain) on benefit obligation for 2008-2009: Net loss/(gain) on assets for 2008-2009: Unrecognized loss/(gain) 06/30/2009 (1.-2.+3.+4.): $1,862,680 93,796 984,809 1,502,679 $4,256,372 19 The following census data was provided to Aon Consulting by Virginia Port Authority as of July 1, 2009: CENSUS DATA Participants Currently receiving payments Active with vested benefits Terminated with deferred vested benefits Active without vested benefits Other Total Number of Persons 37 64 17 65 0 183 Compensation (If Applicable) N/A $3,716,782 N/A 3,339,355 N/A $7,056,137 20 PRIOR SERVICE COST BASES Established 07/01/1998 07/01/2000 07/01/2002 07/01/2005 07/01/2008 07/01/2009 Totals Remaining Period (Years) 10 3 7 10 12 22 Balance As Of 07/01/2008 $ 5,575 75,256 287,770 68,695 300,541 133,389 $871,226 Amortization $ 552 25,084 41,110 6,869 25,045 6,063 $104,723 21 CASH FLOW Estimated Future Benefit Payments Reflecting Expected Future Service (a) 07/01/2009 – 06/30/2010 (b) 07/01/2010 – 06/30/2011 (c) 07/01/2011 – 06/30/2012 (d) 07/01/2012 – 06/30/2013 (e) 07/01/2013 – 06/30/2014 (f) 07/01/2014 – 06/30/2019 335,964 341,431 356,280 350,342 355,683 1,800,572 22 PLAN ASSETS 06/30/2009 Equity Fixed Income Real Estate Cash Other Total 45.0% 23.8% 0.0% 13.1% 18.1% 100.0% 06/30/2008 46.0% 25.4% 0.0% 10.7% 17.9% 100.0% Real Estate 0.0% Other 18.1% Fixed Income 23.8% Cash 13.1% Equity 45.0% 23 Net Periodic Pension Cost for Fiscal Year Ending June 30, 2010 a. b. c. d. e. f. g. Assumptions Discount Rate Long-Term Rate Rate of Compensation Increase Average Remaining Service for Amortization of Gain/Loss 6.82% 8.00% 4.00% 13 Years Service Cost Interest Cost Expected Return on Assets Amortization of Unrecognized Net Transition Obligation Amortization of Unrecognized Prior Service Cost Amortization of Unrecognized (Gain) or Loss Total Expense (a.+b.+c.+d.+e.+f.) $ 698,313 502,166 (349,111) 0 104,723 269,482 $ 1,225,573 24 SECTION 2 Basis of Valuation In this section, the basis of the valuation is presented and described. This information -- the provisions of the plan and the census of participants -- is the foundation of the valuation, since these are the present facts upon which benefit payments will depend. The valuation is based upon the premise that the plan will continue in existence, so that future events must also be considered. These future events are assumed to occur in accordance with the actuarial assumptions and concern such events as the earnings of the fund, the number of participants who will remain to retirement, their ages at retirement and expected benefits. The actuarial assumptions and the actuarial cost method, or funding method, which has been adopted to guide the sponsor in funding the plan in a reasonable and acceptable manner, are described in this section. The actuarial assumptions and cost method are appropriate only for an ongoing plan. Different methodology would be needed to assess the actuarial position of the plan in the event of a plan merger, spin-off, or termination. This report relies on the following information supplied by the Virginia Port Authority: the data on plan participants, a copy of the plan document, and a copy of the plan's financial statements. 25 SECTION 2.1 Summary of Plan Provisions 1. 2. Effective Date: Eligibility: August 1, 1998; latest amendment effective May 26, 2009. Each employee is eligible to enter the plan on his or her date of employment. Employees hired prior to August 1, 1998 who elected continued coverage under the Virginia Retirement System are not eligible to participate in this plan. Age 65; for sworn employees, normal retirement age is 60. An employee's normal retirement benefit equals 1.7% of final average compensation times credited service. The accrued retirement benefit is determined in the same manner as normal retirement benefit with final average compensation and credited service as of the date of computation. The date an employee attains age 50 and completes 30 years of service. A sworn employee attains his or her unreduced early retirement date upon attaining age 50 and completing 25 years of service. Age 55 and 5 years of service, or age 50 with 10 years of service. For sworn employees, reduced early retirement date is age 50 and 5 years of service. The benefit is the employee's accrued benefit payable at normal retirement age without reduction, or without reduction at age 50 if have completed the number of years of credited service required for unreduced early retirement. Otherwise, if the employee retires at age 55 or later, the benefit is the accrued benefit reduced by .5% for each month up to 60 months and .4% for each month in excess of 60 months that his or her early retirement date precedes the earlier of normal retirement age or the date the employee would have reached his or her first unreduced early retirement date assuming employment had continued. If the employee retires before age 55 and is not entitled to an unreduced benefit, the benefit is reduced to age 55 by .5% for each month up to 60 months and .4% for each month in excess of 60 months that his or her early retirement date precedes the earlier of normal retirement age or the date the employee would have reached his or her first unreduced early retirement date assuming employment had continued, and is further reduced by .6% for each month by which actual retirement date precedes age 55. 3. 4. 5. Normal Retirement Age: Normal Retirement Benefit: Accrued Retirement Benefit: 6. Unreduced Early Retirement Date: 7. Reduced Early Retirement Date: 8. Early Retirement Benefit: 26 9. Disability Retirement Benefit: Total and permanent disability and five years of credited service required. Benefits are payable at the member's normal retirement date. The disability retirement benefit is calculated in the same manner as the normal retirement benefit assuming credited service and monthly compensation, as determined for the plan year immediately preceding date of disablement, continues until normal retirement date. Retirement after normal retirement date. A member’s late retirement benefit is equal to the accrued retirement benefit with final average compensation and credited service as of his or her late retirement date. A participant’s accrued benefit becomes vested after five years of credited service. Payable for life. 50% or 100% joint and last survivor options and a Social Security option are available on an actuarially equivalent basis. Credited service is based on years and completed months of employment. The highest average of monthly compensation determined over any consecutive 36 months preceding date of termination. If an employee dies after becoming eligible for retirement and before retirement benefits have begun, the employee's beneficiary will receive a benefit payable for life. The amount of the benefit is the monthly benefit the deceased member would have received had the employee retired on the day before date of death and elected a 100% joint and last survivor option. If a vested member who had not yet begun receiving retirement benefits dies prior to becoming eligible for retirement, his or her beneficiary is entitled to receive a benefit. The amount of the benefit is equal to 100% of the monthly benefit the member would have received if the member had terminated employment rather than died, survived to the earliest retirement age and died having elected a 100% joint and last survivor option. 10. Late Retirement Benefit: 11. 12. 13. 14. 15. Vesting Form of Benefit: Credited Service: Final Average Compensation: Pre-Retirement Death Benefit: 16. Sworn Supplement: Employees in sworn positions receive an enhancement to their accrued benefit equal to .3% of final average compensation for each year of credited service earned in a sworn position. Up to 5 years of credited service in a hazardous position with another employer may be recognized for purposes of this enhancement. Employees who were hired prior to December 1, 2001 may elect to receive an alternative sworn supplement, in lieu of the .3% enhancement described in the preceding paragraph. This alternative supplement provides, for employees in sworn positions who have completed 15 years of credited service, a supplemental benefit equal to $11,508 per year, which is payable from retirement until Social Security normal retirement age. For purposes of satisfying the 15 years of credited service requirement, up to 5 years of credited service in a hazardous position with another governmental employer may be credited. 27 17. Integration with VRS Benefits for Sworn Employees: Sworn employees who receive their basic retirement benefit from VRS and for whom VRS does not provide the normal retirement age, unreduced early retirement benefits and reduced early retirement benefits described for sworn employees under the VPA plan, will receive an additional benefit from the VPA plan. The amount of the benefit is equal to the (1) benefit determined using VPA credited service and the VPA plan normal retirement age, unreduced early retirement benefit and/or reduced early retirement, minus (2) the benefit to which the participant is entitled under VRS based on VPA credited service. 28 SECTION 2.2 Plan Participants Reconciliation of Plan Participants Actives VPA NonSworn Participants, July 1, 2008 Vested Terminations Non-Vested Terminations Death Beneficiary Retirements Disabilities Temporary Payment Period Expired Lump-Sum Payouts Data Corrections Active Survivors New Entrants/Rehires Participants, July 1, 2009 51 VPA NonSworn 5 Vesteds VPA NonSworn 0 Retireds VPA Sworn 73 VRS Sworn 11 VPA Sworn 1 VRS Sworn 1 VPA Sworn 2 VRS Sworn 28 -9 -1 -1 -2 0 0 9 xx 1 xx 0 xx xx xx xx xx xx xx 0 0 -1 0 0 0 0 0 0 0 0 0 -4 0 0 0 0 0 xx 0 0 0 0 xx 0 0 0 0 xx 0 0 0 1 0 0 0 0 0 0 0 -1 0 4 0 0 0 0 40 5 45 0 0 70 7 77 0 0 7 0 7 0 0 xx 0 14 0 0 xx 0 2 0 0 xx 0 1 0 0 xx 3 4 0 0 xx xx 2 0 0 Xx Xx 31 29 Distribution of Active Participants by Age and Service as of July 1, 2009 VPA Non-Sworn Participants C o m p l e t e d Y e a r s o f S e r vi c e Attained Age 0-4 5-9 10-14 15-19 20-24 25 & Over Total Percentage of Total Under 25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 Over 64 Total 1 4 2 2 3 3 3 4 0 0 22 0 1 2 4 5 2 2 1 1 0 18 0 0 0 1 1 2 0 0 0 0 4 0 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 5 4 7 9 7 6 5 1 0 45 2% 11% 9% 16% 20% 16% 13% 11% 2% 0% 100% Over 64 0% 55-59 11% 50-54 13% 60-64 2% Under 25 2% 25-29 11% 30-34 9% 35-39 16% 45-49 16% 40-44 20% 30 Distribution of Active Participants by Age and Service as of July 1, 2009 VPA Sworn Participants C o m p l e t e d Y e a r s o f S e r vi c e Attained Age 0-4 5-9 10-14 15-19 20-24 25 & Over Total Percentage of Total Under 25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 Over 64 Total 0 6 1 2 6 3 2 0 0 0 20 0 2 1 1 5 3 19 5 1 0 37 0 0 1 2 6 3 5 1 1 0 19 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 8 3 5 17 9 26 6 3 0 77 0% 10% 4% 6% 22% 12% 34% 8% 4% 0% 100% Over 64 0% 55-59 8% 60-64 4% Under 25 0% 25-29 10% 30-34 4% 35-39 6% 50-54 34% 40-44 22% 45-49 12% 31 Distribution of Active Participants by Age and Service as of July 1, 2009 VRS Sworn Participants C o m p l e t e d Y e a r s o f S e r vi c e Attained Age 0-4 5-9 10-14 15-19 20-24 25 & Over Total Percentage of Total Under 25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 Over 64 Total 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 1 0 0 0 0 0 0 0 1 0 0 1 0 0 0 0 0 0 1 0 1 0 2 0 0 0 0 0 0 2 1 0 0 3 0 0 0 0 0 0 3 3 1 0 7 0% 0% 0% 0% 0% 0% 43% 43% 14% 0% 100% Under 25 0% Over 64 0% 25-29 30-34 0% 0% 35-39 0% 40-44 0% 45-49 0% 60-64 14% 50-54 43% 55-59 43% 32 SECTION 2.3 Actuarial Basis Actuarial Cost Method – VPA Sworn and Non-Sworn Participants This valuation was performed using the aggregate cost method. Under this method, VPA’s contribution equals the normal cost of the plan. To determine the normal cost for any plan year, the present value of all future plan benefits that are expected to be paid to all active and former participants is computed as of the valuation date. From this amount, the assets on hand as of the valuation date are subtracted. The remainder equals the portion of the present value of future benefits that will be funded by the VPA’s future normal cost payments. By dividing the present value of future normal cost payments by the present value of the compensation that all the active participants are expected to receive from the valuation date until their expected dates of termination or retirement, the normal cost as a percentage of compensation is produced. Finally, the current year’s normal cost in dollars is computed by multiplying the normal cost percentage by the current year’s compensation for all active participants. Changes in the characteristics of the participants due to new entrants, as well as differences between the actuarial assumptions and the actuarial experience, will cause changes in the normal cost percentage. However, as long as the plan is not amended and the actuarial assumptions are not changed, the normal cost percentage should remain approximately level from year to year. The aggregate cost method is appropriate for use with the VPA’s Sworn and Non-Sworn Participants since, at plan inception, these participants had little or no past service. The aggregate method accomplishes the plan sponsor’s objectives by establishing a funding pattern that develops a level percentage of payroll that will fund plan benefits over each employee’s working lifetime as benefits are earned. 33 Actuarial Cost Method – VRS Sworn Participants This valuation was performed using the aggregate cost method. Under this method, VPA’s contribution equals the normal cost of the plan. To determine the normal cost for any plan year, the present value of all future plan benefits that are expected to be paid to all active and former participants is computed as of the valuation date. From this amount, the assets on hand as of the valuation date are subtracted. The remainder equals the portion of the present value of future benefits that will be funded by the VPA’s future normal cost payments. By dividing the present value of future normal cost payments by the present value of the compensation that all the active participants are expected to receive from the valuation date until their expected dates of termination or retirement, the normal cost as a percentage of compensation is produced. Finally, the current year’s normal cost in dollars is computed by multiplying the normal cost percentage by the current year’s compensation for all active participants. Changes in the characteristics of the participants due to new entrants, as well as differences between the actuarial assumptions and the actuarial experience, will cause changes in the normal cost percentage. However, as long as the plan is not amended and the actuarial assumptions are not changed, the normal cost percentage should remain approximately level from year to year. 34 Actuarial Assumptions 1. 2. 3. Interest Rate Salary Increases: Mortality: 7.5% per annum 4% per annum The RP-2000 Combined Mortality Table was used for healthy lives and the mortality tables stated in Rev. Rul. 96-7 were used for disabled lives. Table T-4 from the Pension Actuary's Handbook. The probability of termination is shown in the following table: Age 20 25 30 35 40 45 50 55 60 Probability of Termination 5.44% 5.29% 5.07% 4.70% 4.19% 3.54% 2.48% 0.94% 0.09% 4. Turnover: 5. Disability: Rates of disablement among active plan members are as follows: Age < 40 40-44 45-49 50-54 55-59 60-64 Probability of Disablement 0.089% 0.226% 0.350% 0.621% 1.103% 1.639% 35 6. Retirement Age: Assumed rates of retirement among plan members eligible to retire are as follows: Probability of Retirement Sworn Employees Age 50 51-54 55 56-59 60 61 62 63-64 65 or older 25+ YOS 10% 5% 10% 5% 5% 5% 20% 10% 100% <25 YOS 1% 1% 2% 1% 3% 3% 15% 10% 100% All Others 30+ YOS 8% 4% 8% 4% 4% 4% 15% 8% 100% <30 YOS 1% 1% 2% 1% 3% 3% 10% 8% 100% 7. Marriage and Age of Spouse: 100% of employees are assumed to be married with wives assumed to be three years younger than husbands. 36 Assumption Changes Last Year’s Assumptions (1) Interest Rate (2) Mortality 8.0% per annum The 1994 Group Annuity Table was used for healthy lives and the mortality tables stated in Rev. Rule 96-7 were used for disabled lives. This Year’s Assumptions (1) Interest Rate (2) Mortality 7.5% per annum The RP-2000 Combined Mortality Table was used for healthy lives and the Mortality Tables stated in Rev. Rule 96-7 were used for disabled lives. See pages 13 and 14 for the effect of these assumption changes. 37 Valuation of Assets The market value of assets was used as the actuarial asset value in the valuation. s:\worddoc:VA Port Authority/2009/ValRPT_09 38