Based on the July 1, 2018 Risk Sharing Valuation Study

Houston Firefighters' Relief and Retirement Fund (HFRRF)	Current	Proposed	Difference
Total City Contribution Rate Per HFRRF (as a % of pensionable pay)	37.16%	37.18%	0.02%
Total City Contribution Rate Per City* (as a % of pensionable pay)	27.52%	27.54%	0.02%
Arithmetic Average City Contribution Rate (as a % of pensionable pay)	32.34%	32.36%	0.02%
Unfunded Actuarial Accrued Liability (thousands)	$921,054	$921,668	$614
Actuarial Soundness	Sound	Sound	N/A

*Estimated by the PRB

ACTUARIAL EFFECTS
The bill would change the eligibility age to receive a cost-of-living-adjustment (COLA) for members who terminated active service for any reason other than death prior to July 1, 2017 and is or would have been at least 48 years old as of June 30, 2021.

The current plan grants a COLA for members who are 55 years of age or older on June 30, 2021. The actuarial analysis (AA) states that there are 17 non-disabled retired members who would benefit from the bill since they would be 48 years of age but not age 55 as of June 30, 2021. This would increase the unfunded actuarial accrued liability (UAAL) by approximately $614,000 and increase the required employer contribution by 0.02 percent of payroll.

Under the current Pension Review Board (PRB) Pension Funding Guidelines, funding should be sufficient to cover the normal cost and to amortize the UAAL over as brief a period as possible, but not to exceed 30 years, with 10 - 25 years being the preferable target range. The PRB actuarial review (AR) states that HFRRF is currently actuarially sound. Under the bill, HFRRF would remain actuarially sound.

SYNOPSIS OF PROVISIONS
The bill would change the eligibility age to receive a COLA for members who terminated active service for any reason other than death prior to July 1, 2017 and is or would have been at least 48 years old as of June 30, 2021.

The bill would take effect immediately if it receives a vote of two-thirds of all the members elected to each house, or September 1, 2019.

FINDINGS AND CONCLUSIONS
The PRB review mentions that the AA did not include one non-disabled retiree who terminated prior to July 1, 2017 who will be younger than age 48 as of June 30, 2021; but stated that including this individual in the analysis would have a minimal impact on the plan.

The AR also stated that the actual City contribution rate is the arithmetic average of the estimated contribution rate calculated by HFRRF and the City of Houston, when those estimated contribution rates differ by more than 2 percent. The actual City contribution rate for the 2020 fiscal year as determined in the final July 1, 2018 Risk Sharing Valuation Study was 32.34 percent. It is expected that the actual City contribution rate will continue to be an arithmetic average of the estimated contribution rate calculated by HFRRF and the City of Houston until a new experience study is completed, however, the bill is likely to have a similar impact on both estimated contribution rates. Therefore, the arithmetic average of the estimated contribution rates is also likely to increase by approximately 0.02 percent.

METHODOLOGY AND STANDARDS
The HFRRF analysis relies on the participant data, financial information, benefit structure and actuarial assumptions and methods used in the HFRRF Risk Sharing Valuation Study for July 1, 2018.

According to the PRB actuary, the actuarial assumptions, methods and procedures are reasonable for the purpose of this analysis. 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 HFRRF 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 Aaron Shapiro, FSA, EA, MAAA, FCA, Buck Consultants, 3/28/2019.

Actuarial Review by Kenneth J. Herbold, ASA, EA, MAAA, Staff Actuary, Pension Review Board, 4/3/2019.

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 sufficient to cover the normal cost and to amortize the UAAL over as brief a period as possible, but not to exceed 30 years, with 10-25 years being the preferable target range.
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).