TO:	Honorable Joan Huffman, Chair, Senate Committee on State Affairs
FROM:	Ursula Parks, Director, Legislative Budget Board
IN RE:	HB3158 by Flynn (Relating to the retirement systems for and the provision of other benefits to police and fire fighters in certain municipalities; creating a criminal offense.), Committee Report 2nd House, Substituted

The following information was supplied by Agency 338 - Pension Review Board:

CR2H HB 3158 would make significant changes to Article 6243a-1, Title 109 Revised Civil Statutes (affecting the Dallas Police and Fire Pension System (DPFPS)) to increase both employee and City of Dallas (City) contributions; modify future benefit accruals; provide a retroactive multiplier increase for certain members; modify DROP participation and cost of living adjustments; make changes to the composition and governance structure of the DPFPS board (board); and require the establishment of an investment advisory committee. Article 6243a-1 establishes the basic governing structure of the DPFPS.

 

The proposed changes to the bill, if enacted, would significantly improve the actuarial soundness of the system. Under the existing plan structure, the plan is expected to become insolvent within the next 10 years. While the bill does not immediately bring the amortization period down to 40 years, which is the maximum recommended amortization period according to PRB Guidelines for Actuarial Soundnesscurrently in effect, it sets the system on a path to full funding within a finite period.

 

The actuarial analysis provides the following details regarding the impact of the bill on projected January 1, 2017 actuarial valuation results:

 

* This scenario was included because it was discussed at the Senate State Affairs committee hearing on May 18, 2017 that the automatic COLA will be changed to an ad-hoc COLA through a floor amendment to the bill.

**Amount is a percentage of total pay for current plan and a percentage of computation pay for the If Bill Enacted scenarios, but does not include additional flat dollar annual contributions or the minimum dollar floor, as outlined in the Summary of Plan Changes.

*** Based on the primary contribution requirements, not the alternative contribution requirements, as outlined in the Summary of Plan Changes.

 

The results presented under the If Bill Enacted (w/COLA) scenario assumes a 2.0% COLA is paid in all years beginning with the year 2047. As written, the bill requires a COLA to be paid in any future year in which the funded ratio is at least 70%. However, as was discussed at the Senate State Affairs committee hearing on May 18, 2017, PRB believes that this automatic COLA will be changed to an ad-hoc COLA through a floor amendment to the bill, giving the board discretion regarding whether to provide the stated COLA. The impact of assuming no COLA is paid unless the plan is fully funded after taking into account any ad-hoc COLA, results in the amortization period under the If Bill Enacted (w/o COLA) scenario. Please note that the PRB recommends that the costs of benefit changes, including any ad-hoc COLAs, should be actuarially valued prior to adoption to ensure that additional costs will be funded adequately and continuously.

 

The contribution policy for the City would be a fixed percentage of pay plus a flat dollar contribution per year through the end of 2024. However, the fixed percentage contribution would be subject to a minimum dollar floor in each year (Primary Employer Contributions as outlined in the Summary of Plan Changes section). The amount of the floor, as well as the flat dollar contribution, could potentially be lowered if legislation impacting the City's property tax cap is passed by the 85th Legislature, Regular Session, and the City is unsuccessful in increasing this cap via a local election (Alternative Employer Contributions).

Further, the amortization periods above assume the Primary Employer Contributions, are in effect in all years. If the Alternative Employer Contributions are in effect, the amortization periods shown above would increase to 62 years for the w/COLA scenario and 51 years for the w/o COLA scenario. The result would be an immediate need to make additional changes to bring the amortization period down to 40 years within a 10 year period, in accordance with the Funding Soundness Restoration Plan (FSRP) requirements outlined in Texas Government Code Section 802.2015. However, the PRB believes that the Alternative Employer Contributions will be removed from the bill through a floor amendment.

ACTUARIAL EFFECTS

The actuarial analysis provided by the plan's actuary states that although the retirement system is not projected to reach 100% funding within 30 years, it is projected to eventually become fully funded.  The plan's actuary further states that currently the System is projected to become insolvent within the next 10 years. PRB's actuarial review states that the bill would make the retirement system less unsound and would set it on a path to full funding within a finite period.

 

Based on the results outlined in the actuarial analysis, DPFPS is likely to be immediately subject to the FSRP requirements in Texas Government Code Section 802.2015 once the January 1, 2017 actuarial valuation is finalized, and would therefore need to make additional adjustments to contributions and/or benefits to further reduce the amortization period. However, as was discussed at the Senate State Affairs committee hearing on May 18, 2017, the PRB believes additional changes will be introduced as floor amendments to address some of these specific concerns. These changes have not been included in the actuarial analysis, but are discussed in further detail below.

 

Furthermore, the PRB actuarial review states that it is important to recognize that even after the changes enacted by the bill and the proposed amendments, if all assumptions are met, the UAAL is still expected to grow and the funded ratio is expected to decline in the near term. Also, 90% or more of the City's contribution will be used to pay off the unfunded actuarial accrued liability (UAAL) and therefore any reduction in the City contribution will increase the expected time to fully fund the plan. The actuarial analysis also illustrates the impact or funding risk associated with a prolonged reduction in payroll, which would have the effect of lowering the total dollar amount contributed by the City, by assuming actual payroll is 90% of the projected payroll provided by the City. The worst case scenario shown results in an amortization period in excess of 100 years.  However, the minimum contribution requirement under the Primary Employer Contribution provisions of the bill ensures this has minimal impact until after the floor and additional dollar contribution expire at the end of 2024. During the seventh year, the bill requires the system to engage an independent actuary, selected by the PRB, to provide recommendations regarding potential contribution or benefit changes that ensure the system remains actuarially sound after the contribution floor, including the additional flat dollar contribution, expires.

 

In addition, the expected floor amendments would require the board to adopt rules and submit a plan to the PRB to comply with any funding and amortization period requirements contained in the Texas Government Code (Funding soundness Restoration Plan). This plan would be required to take into consideration the independent actuary's recommendations and outline steps to ensure the retirement system remains on a path to financial solvency. Therefore, the worst case scenarios are unlikely to come to fruition because the board would be required to be proactive.

 

Below is a table of the total projected contribution amounts (City plus employee contributions) under the current and proposed plans for the next 10 years:

 

 

Actuarial Assumptions and Methods

 

The assumptions and methods are the same as used in the January 1, 2016 actuarial valuation report except as noted in the following table.

 

Summary of Changes in Assumptions

 

Discount Rate

7.25% - same as the January 1, 2016 actuarial valuation

 

Investment Return

Market value returns assumed to be 5.00% in 2016, -1.74% in 2017, 5.00% in 2018, 6.50% in 2019, 7.00% in 2020, and 7.25% thereafter. Assumed rates of return were provided by the System.

 

Actuarial Value of Assets

Set equal to market value of assets

 

Administrative Expenses

The greater of $10 million or 1% of computation pay

 

DROP Utilization

It is assumed that there will be no future entrants into DROP

Salary Increases

Select rates added for years 2016 - 2018.

 

2016 and 2018 - 10% if 0 - 10 years, 7% if 11 - 12 years, and 2% if 12 years

2017 - 5% if 0 - 10 years, 2% for all others

Current salary scale applies in 2019 and beyond

Total Computation Payroll

 

Year	Payroll
2017	$372,000,000
2018	$364,000,000
2019	$383,000,000
2020	$396,000,000
2021	$408,000,000
2022	$422,000,000
2023	$438,000,000
2024	$454,000,000
2025	$471,000,000
2026	$488,000,000
2027	$507,000,000
2028	$525,000,000
2029	$545,000,000
2030	$565,000,000
2031	$581,000,000
2032	$597,000,000
2033	$614,000,000
2034	$631,000,000
2035	$648,000,000
2036	$666,000,000
2037	$684,000,000

 

2.75% in all other years

Overtime

The City is no longer assumed to contribute an amount 11% greater than computation pay for overtime work. This assumption does not impact benefits or liabilities.

 

Cost of Living Adjustment (COLA)

Two percent simple COLA assumed to be paid starting in 2047 and every year thereafter, based on the System's benchmark that the Plan must be at least 70% funded on a market value basis prior to and after a COLA is paid. Market returns must meet a certain level over a five-year period before COLA payments can be enacted; it is assumed these levels are met for purposes of these calculations.

Retirement Rates

Retirements are assumed to occur on January 1st.

 

In 2016, rates are increased by 5 percentage points for those participants who have been in DROP for six years or more.

 

Beginning in 2017, the current valuation retirement rates apply, with the following exception:

 

Current Active DROP Participants

-         If at least 8 years in DROP as of 1/1/2017, 100% retirement rate in 2018

-         If less than 8 years in DROP as of 1/1/2017, 50% retirement rate in 2018

 

Retirement Rates Beginning in 2018 for those not in DROP:

 

Age	Tiers 1 & 2, <20 YOS as of 9/1/2017	Tier 1, at least 20 YOS as of 9/1/2017	Tier 3
<50	1%	1%	1%
50	10%	20%	5%
51	5%	10%	5%
52	5%	10%	5%
53	5%	10%	5%
54	5%	20%	10%
55	15%	40%	20%
56	10%	50%	30%
57	5%	50%	40%
58	60%	60%	50%
59	50%	60%	50%
60	50%	60%	50%
61	50%	60%	50%
62	100%	100%	100%

 

100% retirement assumed once total of benefit multipliers reach 90%.

 

Current terminated vested participants are assumed to retire at age 50.

 

Future terminated vested participants are assumed to retire at age 58.

 

DROP Distribution

Current retirees - For those who were retirees as of January 1, 2016, 57.50% of the January 1, 2016 balance was assumed to be paid out in 2016 and 10% of the January 1, 2017 account balance is assumed to be paid out in 2017. Beginning January 1, 2018, the remainder of the DROP accounts are assumed to be paid out over the expected lifetime of the participant upon their retirement based on the mortality tables in effect at the time of their retirement; the expected lifetime is currently assumed to be 23 years. It is understood that the actual date of the change in DROP account distributions may occur prior to January 1, 2018.

 

Current actives - 10% of the January 1, 2017 account balances are assumed to be paid out in 2017 for participants that retire in 2017. Beginning January 1, 2018, DROP accounts are assumed to be paid out over the expected lifetime of the participant upon their retirement, based on the mortality tables in effect at the time of their retirement; the expected lifetime is currently assumed to be 21 years if the Normal Retirement Age is 58. It is understood that the actual date of the change in DROP account distributions may occur prior to January 1, 2018.

 

DROP Account Interest

Current retirees - 2.75%;

 

Current actives - 2.75%; only the DROP account balance as of September 1, 2017 receives interest upon retirement. DROP contributions into existing DROP accounts after September 1, 2017 and future DROP participants receive 0% interest during the DROP and upon retirement.

 

SYNOPSIS OF PROVISIONS

CR2H HB 3158 would amend and add sections to Title 109, Revised Civil Statutes Article 6243a-1 to reduce benefits (summarized in the table below), increase both employee and City contributions, change the board's composition and governance structure, and require the creation of an investment advisory committee.

 

Board Composition

The bill would change the board composition by establishing new requirements for trustee positions. Six of the board trustees would be selected by the mayor and five would be selected by the pension system. The board may not take any action until there are at least 10 initial trustees have been appointed.  

 

Board Governance

The bill would clarify that the executive director is a fiduciary of the pension system, whereas currently the statute states that the “administrator” of the plan is not a fiduciary. The bill would require a two-thirds vote of the full board to implement any rule change concerning board governance. The bill would also require a two-thirds vote of the board for creating an alternative benefit plan, reducing the city contribution rate, increasing the member contribution rate, lowering benefits or otherwise reducing amounts payable to, or accrued for, the benefit of any member, or any rules requiring the equitable return of funds paid to or credited to the benefit of a member or pensioner.

 

The PRB would be entitled to all documents and other information provided by DPFPS to the public, which would then be subject to an independent review by the PRB. Any employee or other agent acting on behalf of DPFPS commits a Class B misdemeanor offense if the person knowingly provides false information to the PRB.

 

The bill would also require the board to adopt a code of ethics and require the board members to take pension-related training from a manual created by the DPFPS executive director.

 

Actuarial Analysis

Prior to July 1, 2024 the PRB would select an actuary without conflicts to be hired by the board to perform an analysis based on the January 1, 2024 actuarial valuation prepared by the pension system. The analysis would include a conclusion by the actuary on whether the plan is actuarially sound based on then-current PRB guidelines, and the actuary would recommend changes to benefits, member or city contributions to be submitted to the board by October 1, 2024. The board will consider the recommendations and adopt the changes it deems necessary. The legislature must approve the changes for them to become part of the statute.

City Contributions

The bill increases both employee and City contributions. The contribution policy for the City would be a fixed percentage of pay plus a flat dollar contribution per year through the end of 2024. However, the fixed percentage contribution would be subject to a minimum dollar floor in each year, which is the primary contribution floor through 2024. 

 

The amount of the floor, as well as the flat dollar contribution, could potentially be lowered if legislation impacting the City's property tax cap were passed by the 85th Legislature, Regular Session, and the City is unsuccessful in increasing this cap via local election.

 

Investment Advisory Committee

The bill would require the board to establish an investment advisory committee. The committee would be composed of a majority of outside investment professionals, as well as sitting board members. The committee would review investment-related matters and make recommendations to the board. In addition, the bill would require a two-thirds vote by the board to approve each alternative investment.

Equitable Adjustments to Benefits

The bill would allow the board to consider and adopt rules requiring the equitable return of funds paid or credited to the benefit of a member or a pensioner before 9/1/17, including the return of excessive interest credited to a member's DROP account and excessive adjustments made as disability or COLA benefits. The bill also outlines the adjudication process for any judicial challenges to the equitable return of funds as required by the board.

 

DROP Payment Options

A member who terminated service before 9/1/2017 shall have their DROP account annuitized in either monthly or yearly distributions based on the member's election. Additionally, a member who has a financial hardship that was not reasonably foreseeable may obtain a lump-sum distribution from the member's DROP account resulting in a corresponding reduction in the total number or amount of annuity payments. The board shall adopt rules regarding what constitutes an unforeseeable emergency or hardship, and in adopting the rules, the board shall provide flexibility to members.

 

Prohibition on Certain Lump Sum Distributions

If the bill receives the required votes, lump sum distributions from DROP accounts are immediately prohibited, except in certain cases. All changes enacted by this bill would be rescinded if the PRB determines that the board violates this restriction.

 

Effective Date

Except as otherwise provided by the Act, the Act takes effect on September 1, 2017.

 

The following table outlines the primary changes to benefit provisions included in the bill.

 

Summary of Plan Changes

Normal Retirement Benefit

Eligibility

  Current          Tier 3: Age 55 and 10 Years of Service

  Proposed        Tier 3: Age 58 and 5 Years of Service

 

Amount

 Current          Tiers 1 & 2: 3.0% x Years of Service x Final Average Salary, no more than 96% x Final Average Salary or less than $2,200 per month (minimum is prorated for periods of service less than 20)

Tier 3: [Years of Service (up to 20) x 2.0% Years of Service (>20, <=25) x 2.5% Years of Service (>25) x 3.0%] x Final Average Salary, not less than $110 x Years of Service (up to 20)

 Proposed        Tiers 1 & 2: [3.0% x Years of Service (prior to September 1, 2017) Percent Multiplier (in table below) x Years of Service (after September 1, 2017)] x Final Average Salary, max is the greater of i. 90% or ii. the vested accrued benefit as of August 31, 2017

                                                                    

                                                                     Age at            Percent

                                                 Retirement       Multiplier

                                     57                2.40%

                                     56                2.30%

                                     55                2.20%

                                     54                2.10%

                           53 and younger     2.00%

 

                        Tier 3: Years of Service x 2.5% x Final Average Salary, max 90%

Final Average Salary

  Current          Tiers 1 & 2: Highest 36 month period

  Proposed        Tiers 1 & 2: Highest 36 month period for service prior to September 1, 2017 and highest 60 month period for service after September 1, 2017

Early Retirement Benefit

Eligibility

  Current          Tiers 1 & 2: Age 45 and 5 Years of Service or 20 Years of Service

                        Tier 3: N/A

Proposed        Tiers 1 & 2: Age 45 and 5 Years of Service, if 45 years or older as of September 1, 2017, age 53 and 5 Years of Service otherwise, or 20 Years of Service

Tier 3: Age 53 and 5 Years of Service or 20 Years of Service

Amount

 Current          Tiers 1 & 2 with 20 Years of Service - replace 3% multiplier with the following based on age at retirement:

                                    Age at

                                    Retirement       Multiplier

                                    48 & 49           2.75%

                                    47                    2.50%

                                    46                    2.25%

                                    45 or younger  2.00%

Tiers 1 & 2 with less than 20 Years of Service: Reduction equal to 2/3 of 1% per month retirement date precedes age 50.

  Proposed        Tiers 1 & 2 with 20 Years of Service accrued as of September 1, 2017 - replace 3% multiplier with the following based on age at retirement:

                       

Age at

                                    Retirement       Multiplier

                                    48 & 49           2.75%

                                    47                    2.50%

                                    46                    2.25%

                                    45 and younger            2.00%

All others with 20 Years of Service - replace 2.5% multiplier with the following based on age at retirement:

                                    Age at

                                    Retirement       Multiplier

                                    57                    2.40%

                                    56                    2.30%

                                    55                    2.20%

                                    54                    2.10%

                                    53 and younger            2.00%

 

With less than 20 Years of Service: Reduction equal to 2/3 of 1% per month retirement date precedes age 45 if 45 years or older as of September 1, 2017, age 53 otherwise.

            Unreduced at any retirement age if a member's pension is equal to 90% of Final Average Salary.

Supplemental Retirement Benefit

 Current          The greater of $75 per month or 3% of their Normal or Early Retirement Benefit, payable beginning at age 55

Proposed        Payable only to those receiving the supplement as of September 1, 2017

 

Vesting

  Current         Tier 3: 10 Year Cliff

  Proposed        Tier 3: 5 Year Cliff

 

Cost of Living Adjustment

  Current          Tier 1: 4.0% simple

  Proposed        If the plan is at least 70% funded after taking into account the COLA, a simple crediting rate on October 1 equal to 100% of the average annual rate of actual investment return for the five-year period ending on the preceding December 31 minus 5%, and not to exceed 4%, beginning at the earlier of age 62 or 3 years after retirement.

 

Deferred Retirement Option Plan

Active

  Current          Interest credited is 6% effective October 1, 2016 dropping to 5% effective October 1, 2017 and variable based on the plans funded ratio thereafter.

                        Funded Ratio   Crediting Rate

                        >=95%             7.0%

                        90%-94%        6.5%

                        85%-89%        6.0%

                        65%-84%        5.0%

                        60%-64%        4.0%

                        55%-59%        3.0%

                        <55%               0.0%

COLA credited to account

No maximum participation period

May elect a lump sum distribution or leave up to 100% of account balance in plan at separation of service and continue to accrue interest credit

  Proposed       No interest credited to account

No COLA credited to account

10 year maximum participation period

DROP balance distributed over the life expectancy at separation of service,

DROP account balance as of September 1, 2017 will be annuitized using a rate on a United States Treasury or other federal treasury note with a reasonable duration, as determined by the Board.

           

Contributions

 Employee

   Current         8.5% for non-DROP active participants & 4.0% for DROP active participants

   Proposed       13.5% as of the effective date

 

 Employer

   Current         27.5% of pay

   Proposed      

Employer

Current            27.5% of total pay

Proposed          A B, as described below

 

Primary            A.  34.5% of computation pay

                       

                                    The employer contribution above will be no less than

i.                      $5,173,000 for each of the pay periods beginning in 2017;

ii.                     $5,344,000 for each of the pay periods beginning in 2018;

iii.                    $5,571,000 for each of the pay periods beginning in 2019;

iv.                    $5,724,000 for each of the pay periods beginning in 2020;

v.                     $5,882,000 for each of the pay periods beginning in 2021;

vi.                    $6,043,000 for each of the pay periods beginning in 2022;

vii.                   $5,812,000 for each of the pay periods beginning in 2023;

viii.                  $6,024,000 for each of the pay periods beginning in 2024; and

ix.                    $0 thereafter

 

B.  1/26th of $11 million per pay period for each pay period beginning after September 1, 2017 and before December 31, 2024

 

Alternative       However, in the event that

a.                     SB 2 or similar legislation of the 85th Legislature, Regular Session, 2017 has the effect of lowering the rollback tax rate of the City is enacted and becomes law; and

b.                     For the applicable tax year the City holds an election to increase the applicable tax rate; and

c.                     That election fails to increase the tax rate; the employer contribution outlined in A above will be no less than

i.                      $4,936,000 for each of the pay periods beginning in 2017;

ii.                     $4,830,000 for each of the pay periods beginning in 2018;

iii.                    $5,,082,000 for each of the pay periods beginning in 2019;

iv.                    $5,255,000 for each of the pay periods beginning in 2020;

v.                     $5,414,000 for each of the pay periods beginning in 2021;

vi.                    $5,600,000 for each of the pay periods beginning in 2022;

vii.                   $5,812,000 for each of the pay periods beginning in 2023;

viii.                  $6,024,000 for each of the pay periods beginning in 2024;

ix.                    $0 thereafter; and

 

The $11 million outlined in B above would be replaced with $5 million.

 

The contributions outlined above would remain in force as long as the system has a UAAL. If the plan is fully funded, contributions would be split equally between the city and members.

FINDINGS AND CONCLUSIONS

Given that the bill provisions for DPFPS would increase the total contribution rate and reduce current liabilities, it would increase the long-term funding security for all members of the affected retirement systems. It would impact all current and future active members because it increases the employee contributions for all groups of members. In addition, certain classes of active and inactive members are impacted by changes in plan provisions. Current active members would see changes to their prospective and retroactive benefit multiplier, as well as changes to retirement eligibility requirements and contribution requirements. Limits would be placed on the total DROP participation period and future interest accruals for current and future DROP participants. The bill would also make changes to future cost of living adjustments (COLA) that will impact current and future retirees and beneficiaries.

 

The actuarial review states that the actuarial assumptions and methods are the same as used by Segal for the January 1, 2016 actuarial valuation, except as noted in the Summary of Changes in Assumptions table above. The assumptions and methods used by Segal are reasonable.

 

Finally, based on the results outlined in the actuarial analysis, DPFPS is likely to be subject to the Funding Soundness Restoration Plan (FSRP) requirements outlined in Texas Government Code Section 802.2015 once the January 1, 2017 actuarial valuation is finalized, and will therefore need to make additional adjustments to contributions and/or benefits to further reduce their amortization period. However, the PRB believes that the current bill with the additional changes expected to be included in floor amendments, will be sufficient to satisfy the Funding Soundness Restoration Plan Requirements.

METHODOLOGY AND STANDARDS

 

According to the PRB actuaries, to the best of their knowledge, no material biases exist with respect to the data, methods or assumptions used to develop the analysis other than those specifically identified above and in the actuarial review. The PRB did not audit the information provided but has reviewed the information for reasonableness and consistency with other information provided by or for the affected retirement systems. The PRB is not responsible for the accuracy or completeness of the information provided to the agency. All actuarial projections have a degree of uncertainty because they are based on the probability of occurrence of future contingent events. Accordingly, actual results will be different from the results contained in the analysis to the extent actual future experience varies from the experience implied by the assumptions. This analysis is based on the assumption that no other legislative changes affecting the funding or benefits of DPFPS will be adopted. It should be noted that when several proposals are adopted, the effect of each may be compounded, resulting in a cost that is greater (or less) than the sum of each proposal considered independently.

 

SOURCES

Actuarial Analysis by Jeffery S. Williams, FCA, ASA, MAAA, EA, Vice President and Consulting Actuary, Segal Consulting, May 17, 2017.

Actuarial Review by Kenneth J. Herbold, ASA, EA, MAAA, Staff Actuary, Pension Review Board, May 19, 2017.

 

GLOSSARY

Actuarial Accrued Liability (AAL) -The portion of the PVFB that is attributed to past service.

Actuarial Value of Assets (AVA) - The smoothed value of system's assets.

Amortization Payments - The yearly payments made to reduce the Unfunded Actuarial Accrued Liability (UAAL).

Amortization Period - The number of years required to pay off the unfunded actuarial accrued liability. The State Pension Review Board recommends that funding should be adequate to amortize the UAAL over a period which should not exceed 40 years, with 15-25 years being a more preferable target. An amortization period of 0-15 years is also a more preferable target.  

Actuarial Cost Method - A method used by actuaries to divide the Present Value of Future Benefits (PVFB) into the Actuarial Accrued Liability (AAL), the Present Value of Future Normal Costs (PVFNC), and the Normal Cost (NC).

Funded Ratio (FR) - The ratio of actuarial assets to the actuarial accrued liabilities.

Market Value of Assets (MVA) - The fair market value of the system's assets.

Normal Cost (NC) - The portion of the PVFB that is attributed to the current year of service.

Present Value of Future Benefits (PVFB) - The present value of all benefits expected to be paid from the plan to current plan participants.

Present Value of Future Normal Costs (PVFNC) - The portion of the PVFB that will be attributed to future years of service.

Unfunded Actuarial Accrued Liability (UAAL) - The Actuarial Accrued Liability (AAL) less the Actuarial Value of Assets (AVA).