22-2024ORDINANCENO. 22-2024
AN ORDINANCE OF THE CITY OF DENTON, TEXAS APPROVING THE DENTONFIREMEN’S RELIEF AND RETIRMENT FUND ACTUARIAL VALUATION AS OFDECEMBER 31, 2021 ; AND PROVIDING AN EFFECTIVE DATE.
WHEREAS, the City of Denton participates in the Texas Municipal Retirement System
and the Denton Firemen’s Relief and Retirement Fund pension plans; and
WHEREAS, the Denton Firemen’s Relief and Retirement Fund covers firefighters in the
Denton Fire Department, and the Texas Municipal Retirement System covers all other eligible cityof Denton employees with the exception of temporary positions; and
WHEREAS, due to actuarial issues the City increased its contribution rate to the Texas
Municipal Retirement System over time, which provided no increase in benefits and instead
reduced liabilities and improved the overall health of the plan; and
WHEREAS, due to the increases in the Texas Municipal Retirement System contribution
rate, the Denton Firemen’s Relief and Retirement Fund requested the same contribution rate; and
WHEREAS, in 2010 the City agreed to increase the Denton Firemen’s Relief and
Retirement Fund through the meet and confer process; and
WHEREAS, due to changes in the demographic and investment climate, the DentonFiremen’s Relief and Retirement Fund needed to be decoupled from the Texas Municipal
Retirement System contribution rate; and
WHEREAS, as a result of changing demographic and investment factors, the Denton
Firemen’s Relief and Retirement Fund, the City of Denton, and the Denton Firefighter’s
Association entered into an agreement in 2017 intended to achieve a 100% funding ratio over a
closed 25 year amortization period; and
WHEREAS, the 2017 agreement also required the Denton Firemen’s Relief and
Retirement Fund to conduct an actuarial analysis every two years and the City Council has the
opportunity to approve each actuarial report. Once the report is approved by the City Council, the
City’s contribution rate will be adjusted to achieve actuarial goals; and
WHEREAS, in 2019 the City and the Denton Fire Fighters Association agreed to a new
Meet & Confer agreement that incorporated all the pension provisions included in the 2017
agreement; and
WHEREAS, the overall results of the actuarial report are very positive, the funded ratio
has increased from 80.8% to 88.8%, and the amortization period has been decreased from 18.3
years to 9.1 years; and
WHEREAS, despite the health of the fund, staff is recommending that the City’scontribution rate to the Denton Firemen’s Relief and Retirement Fund be maintained at 18.5%
because of various actuarial factors impacting the fund as well as the current economic uncertaintyand investment market challenges; NOW THEREFORE,
THE CITY COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION 1. The findings and recitations contained in the preamble of this ordinance are
incorporated herein by reference.
SECTION 2. The City Council of the City of Denton hereby approves the Denton
Firemen’s Relief and Retirement Fund Actuarial Valuation as of December 3 1, 2021 attached to
this ordinance and incorporated herein for all purposes.
SECTION 3. This ordinance shall become effective immediately upon its passage and
approval.
The motion to approve this ordinance was made by e rIaA epr]( and
seconded by AliSon MaJID(re , the ordinance was passed and approved bythe following vote [1 - a :
Aye
\//
P/
1/
1/
b/
V’
b/
Nay Abstain Absent
Gerard Hudspeth, Mayor:
Vicki Byrd, District 1 :
Brian Beck, District 2 :
Jesse Davis, District 3 :
Allison Maguire, District 4:
Brandon Chase McGee, At Large Place 5 :
Chris Watts, At Large Place 6:
PASSED AND APPROVED thi, ,h, alt"- d,y ,f Sq)bAUM , 2022.
mRRFJHmrbiA–Y–M
ATTEST:
ROSA RIOS, CITY SECRETARY ,\\11111111DE&Be••••ee
+
rON
111111 S
c;? ,_ 'Z&‘
APPROVED AS TO LEGAL FORM:MACK RE[NWAND, CITY ATTORNEY
Denton Firemen’s
Relief and Retirement Fund
Actuarial Valuation
as of December 31, 2021
July 15, 2022
Rudd and Wisdom, Inc.
CONSULTING ACTUARIES
Mitchell L. Babe, F.S. A.
Evan L. Dial. F.S.A
Philip S, Dial, F.S.A.Charles V. Faerber, F.S.A., A.C.A.S
Mark R, Fenlaw, F.S.A
Brandon L. Fuller, F.S.A
Shannon R. Hatfield, F.S.A.
Christopher S. Johnson, F.S. A.Oliver B. Kiel, F.S.A.
Dustin J. Kim, F.S. A
Edward A. Mire, F.S.A
Rebecca B. Morris. A.S. A
Amanda L. Murphy, F.S. A.
Michael J. Muth, F.S. A.
Khiem Ngo, F.S.A., A.C.A.S.
Timothy B. Seifert, F.S.AChelsea E. Stewart, F.S. A
Raymond W. TilottaRonald W. Tobleman, F.S. A
David G. Wilkes, F.S.A
July 15, 2022
Board of Trustees
Denton Firemen’s Relief
and Retirement Fund
P.O. Box 2375
Denton, TX 76202
Members of the Board of Trustees :
At the request of the Board of Trustees of the Denton Firemen’s Relief and Retirement Fund, we
have prepared this report of the results of the actuarial valuation of the fund as of December 31,
2021. This valuation was prepared (1) to determine the city’s contribution rate under its current
funding policy, which is a modified actuarially determined contribution rate funding policy, (2) to
recommend a city contribution rate for the next two years, and (3) to highlight the fund’s actuarialcondition.
In a separate report, we will provide the necessary disclosures for the fund’s compliance with the
Governmental Accounting Standards Board (GASB) Statement No. 67 for the plan year ending
December 31, 2021. Similarly, we will provide a separate report later in the year containing the
pension expense, net pension liability, and disclosure information for the city’s compliance with
GASB 68 for the fiscal year ending September 30, 2022. GASB 68 prescribes the city’s accounting
for your fund, while this actuarial valuation report reflects the assumed continuation of the current
funding policy, first adopted in December 2017.
We certify that we are members of the American Academy of Actuaries who meet Qualification
Standards of the American Academy of Actuaries to render the actuarial opinions contained in this
report
Sincerely,
MaxI E. +%IaAF
Mark R. Fenlaw, F.S.A
Rebecca B. Morris, A.S.A.
i:\clients\6re\wd\vals\2022\denton\denton- 12-3 1 -2 1.docx
9500 Arboretum Blvd., Suite 200Austin. Texas 78759
www.ruddwisdom.com Phone: (512) 346-1590Fax: (512) 345-7437
DENTON FrREM£N’S RELIEF
AND R£TIREMENT FUND
ACTUARIAL VALUATION
AS OF DECEMBER 31, 2021
TABLE OF CONTENTS
Section I
Section II
Section III
Exhibit 1
Exhibit 2
Exhibit 3
Exhibit 4
Exhibit 5
Valuation Summary................................................................................... 1
Key Results of the Actuarial Valuation ...._.____.........._.___________. 8
Benefit Improvements __._.____._...__________...._.._.._____._.___... II
Distribution of Firefighters by Age and Service __.___..__..._______. 12
Summary of Pensioner Data ....___.....________._....___...._..___._..__ 13
Firefighter and Pensioner Reconciliation .___.______._.._.__.__.__._. 14
Breakdown of Pensioners by Monthly Benefit Amounts .._____.....__ 15
Historical Comparison of Actuarial Accrued Liability andActuarial Value of Assets _____.._...______.___.__.._..._____..._____. 16
Summary of Asset bata ........................................................................... 17
Statement of Changes in Assets .__..._________..._....._.._.___._._...._. 18
Development of Actuarial Value of Assets _____.__.._...______.__._.. 19
Historical Comparison of Market and Actuarial Value ofAssets _____.__._..._.____.____..._.__.._________.____......_.__._._.__. 20
Comparison of Market Value Asset Allocation as of thePrior and Current Actuarial Valuation Dates ...____.._...._.__._____. 21
Actuarial Methods and Assumptions ..................................................... 22
Disability Rates, Termination Rates, and CompensationIncreases.................................................................................................... 26
Definitions .___.________.____.____...___...__.............._.....____.__.__ 27
Summary of Present Plan........................................................................ 29
Review of the Actuarial Economic Assumptions __..._.______.__..._.. 31
Exhibit 6
Exhibit 7
Exhibit 8
Exhibit 9
Exhibit 10
Exhibit 11
Exhibit 12
Exhibit 13
Exhibit 14
Appendix A
RUDD AND WISDOM9 INC,
D£NTON FrR£MEN’S RELIEF
AND RtTrREMEvr FtrND
ACTUARLAL VALUATION
AS OF DECEMBER 31. 2021
Section I
Valuation Summary
An actuarial valuation of the assets and liabilities of the Denton Firemen’s Relief and
Retirement Fund as of December 3 1, 2021 has been completed. The valuation was based
on the Present Plan (plan effective July 1, 2022) and the provisions of the Texas Local FireFighters’ Retirement Act (TLFFRA) which were in effect on December 31, 2021.
Section II shows the summary of key results of the actuarial valuation as of December 3 1,
2021 and discusses the significant changes since the prior valuation that we prepared as of
December 3 1 , 2019.
The city’s funding policy for the fund, first adopted in December 2017, was made a part of
the Meet and Confer Agreement effective October 1, 2019. The funding policy is a
modified actuarially determined contribution rate (ADCR). Under that policy, the city’s
initial contribution rate was set at 18.5% and is to be re-evaluated by the city council
following every actuarial valuation. The funding policy has the intent of paying off the
unfunded actuarial accrued liability (UAAL) over a closed 25-year period or sooner. The
policy language implies that the rate should stay at 18.5% for at least the first five years,
even if the ADCR is less than 18.5%, in order to pay down the UAAT,. A key requirement
of the policy is city approval of any change to the contribution level.
The fbnding policy begins with the 18.5% city contribution rate, has an ADCR over a
closed 25-year period we assume began Janqary 1, 2018, but in no event will the city
contribution rate be less than the contribution rate to its TMRS plan for the other cityemployees. The ADCR over the 21 years remaining in the closed period as ofDecember 31, 2021 is 14.28% based on this actuarial valuation. The TMRS rate for the
year beginning January 1, 2023 is 18.15%. We recommend continuation of the current
18.5% city contribution rate.
Assuming the city continues contributing a level 18.5% each year, we actuarially
determined the UAAT, amortization period. With the assumed continuous future 18.5%
city contribution rate, there would be a total contribution rate each year of 31.1%,
comprised of 12.6% by the firefighters and 18.5% by the city. The total contribution rate
of 31.1% exceeds the normal cost rate of 22.23%, leaving 8.87% available to amortize the
UAAT , of $15,955,827. Assuming that the total payroll increases at the rate of 3% per year
in the future, the contributions in excess of the normal cost would be expected to amortize
the UAAL in 9.1 years.
There are several reasons that support the city planning to keep its contribution rate at18.5%:
• Continuing to contribute 18.5% each year would continue to accelerate both the
amortization of the UAAT , and increasing the fLmded ratio.
RUDD AND WISDOM, INC,PAGE 1
DENTON FIR£MEN’S RELIEr
AND RETIREMENT FUND
ACTUARIAL VALUATION
AS OF DECEMBER 31. 2021
• it would hedge against potential future adverse experience, such as the investmentexperience in 2018 and so far in 2022, or any potential future changes in
assumptr ons.
• it would better position the fund to provide another ad hoc increase in the monthlybenefit for retirees at some future date without a rate increase.
The city should also consider contributing more to the retirement plan for its firefighters
than to TMRS every year for these reasons:
1. Low firefighter turnover – Their lower turnover than other city employees means that
a higher percent of firefighters will ultimately qualify for a retirement benefit than other
city employees. As a result, their benefits cost more as a percent of pay.
2. Physical demands of the job – Because of this, firefighters tend to retire at earlier ages
than other city employees. As a result, their benefits cost more as a percent of pay
because they are paid over a longer period of retirement.
3.Post-retirement increases – Retirees in TMRS have for years been getting annual
increases in their monthly benefits based on 70% of the CPI while retired firefighters
have had only two increases since 2008, a modest 2% increase in 2008 and a modest
tier of increases in 2022 (4% for those retired for 15 or more years, 3% for those retired
for 10 to 15 years, and 2% for those retired 5 to 10 years).
4. Employee contribution rates – Firefighters contribute 12.6% of their pay to the fund
while other city employees contribute only 7% to TMRS.
In order for a retirement plan to have an adequate contribution arrangement, contributions
must be made that are sufficient to pay the plan’s normal cost and to amortize the plan’s
UAAT, over a reasonable period of time. Based on the current Texas Pension Review
Board (PRB) pension funding guidelines, our professional judgment, and the actuarial
assumptions and methods used in making this valuation, we consider periods of 20 years
or less to be preferable and 30 years to be the maximum acceptable period. Since the total
assumed contributions are sufficient to pay the fund’s normal cost and to amortize the
fund’s UAAT, in 9.1 years, we are of the opinion that the fund, based on present levels of
benefits and assumed contributions has an adequate contribution arrangement. Section
III presents considerations for future benefit improvements.
Projected Actuarial Valuation Results
In addition to completing this actuarial valuation, we estimated the amortization periods as
of December 31, 2023 and as of December 31, 2025 by making projections from the
December 3 1 , 2021 actuarial valuation and assuming a fixed city contribution rate of 1 8.5%
until the UAAT, is amortized. These projections examine the effect on the amortization
period in the next two actuarial valuations of the actuarial investment gains and losses that
RUDD AND WISDOM, INC.PAGE 2
DENTON FrR£MEN’S RELIEF
AND RETrREMEVr FUND ACTUARIAL VALUATION
AS Or DECEMB£R 31, 2021
the hInd experienced in the four years prior to the valuation date (loss in 2018 and gains in
2019, 2020, and 2021) that have been only partially recognized as of December 3 1, 2021.
As shown in Exhibit 8, a smoothing method is used to determine the actuarial value of
assets (AVA) for this valuation. This method phases in over a five-year period any
investment gains or losses (net actual investment return greater or less than the actuadallyassumed investment return) that the fund has had. The AVA used in this current valuation
is deferring recognition of various portions of the gains and losses in 2018-2021 that the
fund experienced. The AVA used in this valuation is $126,483,819. The market value of
assets (MVA) is $140,537,577. The $14 million difference between the MVA and the
AVA is the deferred net gain over the past four years that will be recognized in the nexttwo actuarial valuations.
The theory behind the AVA method is to allow time for investment gains and losses to
partially offset each other and thereby dampen the volatility associated with the progression
of the MVA over time. In practice, the timing and amounts of investment gains and losses
can result in irregular effects on the AVA in a given year. However, as intended, the patternof the AVA is smoother over time than the pattern of the MVA, as seen in Exhibit 9.
For the purpose of projecting the amortization period through 2025 we used six scenarios
of various assumed annual rates of investment return, net of investment-related expenses,over the 2022-2025 projection period. These projections show the expected effects over
the next four years after the valuation date (1) of the recognition of the portions of the
investment gains and losses over the past four years that are deferred as of December 31,
2021, and (2) of investment returns over the next four years different from the 6.75%
assumption used in this valuation.
Scenario
1 5 6
Assumed Investment Return
for Calendar Year2022
20232024
2025
2026 and later
6.75%
6.75
6.75
6.75
6.75
-15.00%
6.75
6.75
6.75
6.75
• 10.00%
0.00
4.00
4.00
6.75
-15.00%
0.00
10.00
10.00
6.75
-10.00%
-10.00
12.00
10.00
6.75
-10.00%
-10.00
4.00
4.00
6.75
Amortization Period in Years
as of December 3 1 :
2021 (actual)
2023 (projected)
2025 (projected)
9.1
1.9
0.0
9.1
10.0
12.8
9.1
10.2
14.0
9.1
15.8
15.1
9.1 1 9.121.6 1 21.616.4 1 26.6
The projected amortization period as of December 3 1, 2025 in Scenario 1 (no investment
gains or losses) reveals that instead of decreasing by the expected four years from 9.1 years
RUDD AND WISDOM, INC.[ i!!!X1
DENTON FIREMEN’S RELIEF
AND RETIREMENT FUND
AcruARrAr. VALUATION
AS OF DECEMBER 31. 2021
to 5.1 years, the amortization period is projected to decrease to 0.0 years. The bigger
reduction is due to the $14 million deferred net gain.
Scenarios 2-6 assume two different adverse investment results for 2022 due to the negative
effects of the increase in interest rates and inflation on global markets and a variety of
returns in the three years following. The fbnding policy with its initial 25-year closed
amortization period would seek amortization periods no greater than 19 years as of
December 3 1 , 2023 and no greater than 17 years as of December 3 1, 2025. Only Scenarios
5 and 6 would result in a need to increase the city contribution rate above 18.5%. The $14
million deferred net gain will be recognized in the next two biennial actuarial valuations
and will partially offset the projected adverse investment experience.
We do not know what the investment experience will be for each of the next four calendar
years. Variations in experience from the underlying assumptions, other than investment
return, will cause the actual amortization periods to be different from the periods shown
above, but investment experience will be the biggest influence on future actuarial
valuations. In addition, the future investment experience in each of the next four years
could be better or worse than the assumed rates shown. These scenarios present a range of
mostly unfavorable scenarios for the next two valuations assuming no changes in
contribution rates or benefits or assumptions.
Participant and Asset Data
We have relied on and based our valuation on the active firefighter data, pensioner data,
and asset data provided on behalf of the board of trustees by Gary Calmes, who provides
administrative services for the board of trustees. We have not audited the data provided
but have reviewed it for reasonableness and consistency relative to the data provided forthe December 31, 2019 actuarial valuation. Exhibit 1 is a distribution of the active
firefighters by age and service. The assumed 2022 compensation used for projecting future
contributions and benefits for each active firefighter in the valuation was the actual
compensation for calendar year 2021, adjusted by 2% to reflect the net effect of the variablepay increases effective in April 2021 and April 2022. The total of these assumed
compensation amounts is our assumed annualized covered payroll for the plan year
beginning January 1, 2022 and is used to determine the UAAT, amortization period with
the assumed continuation of the 18.5% city contribution rate. The averages of the assumed
compensation amounts for the 2022 plan year are shown in Exhibit 1.
Exhibit 2 contains summary information on the pensioners. The monthly benefit payments
are generally based on the amounts paid in January 2022. Exhibit 3 is a reconciliation of
firefighters and pensioners from December 31, 2019 to December 31, 2021. Exhibit 4
shows a breakdown of the dollar amount of the monthly benefits for retirees and surviving
spouses. Exhibit 5 shows a historical comparison of the actuarial accrued liability and theactuarial value of assets.
RUDD AND WISDOM, INC.PAGE 4
DENTON FIREMEN’S R£LIEF
AND R£TIR£MEVr FI Wn
ACTUARIAL VALUATION
AS OF DECEMBER 31. 2021
The summary of assets contained in Exhibit 6 is based on the December 31, 2021 marketvalue of assets contained in the information received from the board. This exhibit also
shows a comparison with the market values and actuarial values of assets as of
December 3 1, 2019 and December 3 1, 2021. Exhibit 7 contains the statement of changes
in assets for 2021 and 2020. Exhibit 8 shows the development of the actuarial value of
assets. Exhibit 9 shows a historical comparison between the market value and actuarial
value of assets. A comparison of the market value asset allocation by asset class as of
December 3 1, 2019 and December 3 1, 2021 is shown in Exhibit 10.
Assumptions
As a part of each actuarial valuation, we review the actuarial assumptions used in the prioractuarial valuation. As a result of our review, we have selected and used actuarial
assumptions we consider to be reasonable and appropriate estimates of future experience
for the fb:nd for the long-term future. Their selection complies with the applicable actuarialstandards of practice. Significant actuarial assumptions used in the valuation are:
1. 6.75% annual investment return net of investment-related expenses;
2. 3% annual general compensation increase combined with promotion, step, and
longevity increases which average 1.98% per year over a 30-year career;
3. Retirement rates which result in an average expected age at retirement of 57.0; and
4. PubS-2010 (safety employees) total dataset mortality tables projected for mortalityimprovement using scale MP-2019.
No changes in actuarial assumptions have been made compared to those used in the
December 3 1, 2019 valuation. A summary of all the assumptions and methods used in the
valuation is shown in Exhibits 11 and 12. In our opinion, the assumptions used, both in
the aggregate and individually, are reasonably related to the experience of the fund and to
reasonable expectations.
Changes in Plan Provisions
At your request in 2021, we studied the effects of tiered post-retirement increases of 4%,
3%, or 2%, depending on the length of time since the initial benefit commenced. As a
result, the firefighters, the board of trustees, and the city council approved the increases to
be effective July 1, 2022. The 4% increase was for those whose benefit commenced more
than 15 years ago, the 3% increase for those whose benefit commenced 10 to 15 years ago,
and the 2% increase for those whose benefit commenced 5 to 10 years ago. These ad hoc
increases were reflected in this December 3 1, 202 1 actuarial valuation.
RUDD AND WISDOM, INC.[ i!!!B
DENTON FIREMEN’S RELIEF
AND RETIREMENT FUND
ACrUARIAL VALUATIONAS OF DECEMBER 31. 2021
Other Supporting Exhibits
Exhibit 13 contains definitions of terms used in this actuarial valuation report. Exhibit 14
summarizes the plan provisions of the Present Plan. Appendix A documents our review of
the economic assumptions.
Funding Policy for the City
After negotiations in 20 17 among representatives from the city manager’s office, the board
of trustees, and the Denton Fire Fighters Association, an agreement was reached to amend
the prior Meet and Confer Agreement. Final approval by the city council occurred in
December 2017. The same language was included in the Meet and Confer Agreement
effective October 1, 2019. The city’s funding policy for the fund is a modified actuarially
determined contribution rate (ADCR) policy summarized below.
• The fLmding policy is intended to fully pay off the UAAT, over a closed 25-year
amortization period that we assume began January 1, 2018.
•The city began contributing 18.5% of compensation in late December 2017.
• Each subsequent actuarial valuation for the board will include the modified ADCR
for the city’s review.
• if the actuarial valuation and modified ADCR are determined to be reasonable by
the city, the city’s contribution rate will be adjusted to the new modified ADCR
beginning on the next October 1 st.
• However, the contribution rate will not be lower than the initial 18.5% until the
amortization period is 20 years or less.
• Two minimum constraints for the modified ADCR are that it will not be less than
the city’s TMRS rate or the minimum rate under TLFFRA.
•Any change to the contribution level is subject to final approval by the city.
Variability in Future Actuarial Measurement
Future actuarial measurements may differ significantly from the current measurements
presented in this report due to such factors as the following:
• Plan experience differing from that anticipated by the current economic or
demographic assumptions;
RUDD AND WISDOM9 INC,PAGE 6
D£NTON FIREMEN’S RELIEF
AND RETIREMEVr FUND
ACrUARrAL VALUATIONAS OF DECEMBER 31. 2021
• Increases or decreases expected as part of the natural operation of the methodology
used for these measurements;
•Changes in economic or demographic assumptions; and
• Changes in plan provisions.
Analysis of the potential range of such future measurements resulting from the possible
sources of measurement variability was provided in the projected amortization periods for
the next two biennial actuarial valuations under six scenarios. These projections were
designed to assess the risk of variance of potential future investment rates of return in the
four years following the actuarial valuation date from the assumed 6.75% rate and the
potential effect on the amortization period. Additional or other sensitivity analysis could
be performed in a subsequent report if desired by the board of trustees.
Respectfully submitted,RUDD AND WISDOM, INC.
'MaAA E. +%leAd-eLheLB.rYjrLz&
Mark R. Fenlaw
Fellow, Society of Actuaries
Member, American Academy of Actuaries
Rebecca B. Morris
Associate, Society of Actuaries
Member, American Academy of Actuaries
IRtIM\ DaM\\. I\a PAGE 7
DENTON FIREMEN’S RELIEF
AND RETrREMEVr FUND
ACrUARrAL VALUATIONAS OF DECEMBER 31. 20219J•rV'4•rl
Section II
Key Results of the Actuarial Valuation
December 3 1 ,
20191
December 3 1,
2021
1.Actuarial present value of future benefits
a. Those now receiving benefits or former
firefighters entitled to receive benefits
b. Firefightersc. Total
$ 44,259,778127,238, 142
$ 171,497,920
$ 50,741 ,710
149, 133,377
$ 199,875,087
2. Actuarial present value of future normal costcontributions $ 50,055,555 $ 57,435,441
3 . Actuarial accrued liability (Item lc – Item 2)
4. Actuarial value of assets
$ 121,442,365 $ 142,439,646
$ 98,109,262 $ 126,483,819
5 . Unfunded actuarial accrued liability
(UAAL) (Item 3 - Item 4)$ 23,333,103 $ 15,955,827
6. Contributions (percent of pay)
a. Firefighters
b. City of Denton2c. Total
12.60%
18.50%
31.10%
12.60%
18.50%
31.10%
7. Normal cost (percent of payroll)22.33%22.23%
8. Percent of payroll available to amortize the UAAL
(Item 6c - Item 7)8.77%8.87%
23,63 1 ,8529. Annualized covered payroll $ 20,151,687 $
10. Actuarially determined period to amortize the UAALbased on Item 6b 18.3 years
80.8%
9.1 years
88.8%11. Funded ratio (Item 4 + Item 3)3
I
2
All items are from the December 3 1, 2019 actuarial valuation and reflect the Present Plan prior to the July 1, 2022 pensioner increases.
For both actuarial valuations, 18.5% is the initial contribution rate in the current city funding policy, and was assumed to continue.
The funded ratio is not appropriate for assessing either the need for or the amount of future contributions or the adequacy of the
assumed contribution rates. Using the market value of assets instead of the actuarial value of assets for Item 11 would have resultedin funded ratios of 85.5% as of December 31, 2019 and 98.7% as of December 31, 2021. The best indicator of the fund’s health is
Item 10
RUDD AND WISDOM9 INC,PAGE 8
DENTON FIREMEN’S RELrEF
AND RETrREMEVr FUND
ACTUARIAL VALUATION
AS OF D£C£MBER 31, 2021
Changes in the Unfunded Actuarial Accrued Liability
In comparing this actuarial valuation to the prior one, the UAAT, decreased by 87,377,276
from $23,333,103 as of December 31, 2019 to $15,955,827 as of December 31, 2021. Thetable below summarizes the reasons for the decrease.
Reason for Change
• Expected decrease
(assumed amortization payments accumulated with interest
exceeding interest on UAAL)
Investment gain for the two years
(based on the AVA average annual return of 1 1 .9%)
Experience loss
(net difference between actual experience and assumed
experience for contributions, pay increases, retirements,
mortality, and terminations, but primarily due to greater pay
increases than expected)
Tiered post-retirement increases
•
•
Amount
$ (569,573)
(11,298,734)
3,416,891
1.074.140•
Total $ (7,377,276)
Changes in the Actuarially Determined Amortization Period
The amortization period, based on the Present Plan provisions, was determined in theactuarial valuation as of December 3 1, 2019, to be 18.3 years. Since two years have passed
since that valuation date, a 16.3-year amortization period would be expected if all actuarial
assumptions had been exactly met, no changes had occurred (other than those expected) in
the firefighter and pensioner data, and no changes in assumptions or benefits or fbndingpolicy had been made. The amortization period is now 9.1 years based on the same
assumptions and funding policy but different plan provisions. The actual experience
occurring between December 31, 2019 and December 3 1, 2021 differed from the expected
experience, and in combination with the change in plan provisions, the resulting
amortization period is 9.1 years, which is 7.2 years less than the expected 16.3 -year period
for the following reasons:
1.The average annual rate of investment return, net of investment-related expenses, onthe market value of assets during the two plan years 2020 and 2021 was 14.8%.However, the actuarial value of assets (AVA) used in the valuation and the
determination of the amortization period is based on an adjusted market value. The
average annual rate of return on the AVA, net of investment-related expenses, for plan
years 2020 and 2021 was 11.9% compared to the assumed rate of return for those years
of 6.75%. This caused a decrease in the amortization period of 9.2 years.
RUDD AND WISDOM, INC.PAGE 9
DENTON FIREMEN’S RELIEF
AND RETIREMENT FUND
ACrUARIAL VALUATION
AS OF DECEMBER 31, 2021
2. The aggregate payroll increased at an average rate of 8.3% per year, compared to the
assumed 3% per year rate, which caused the amortization period to decrease by 0.8 of
a year
3 . The net result of all experience other than the investment experience and the aggregate
payroll experience had the combined effect of increasing the amortization period by
2.1 years. This was primarily the result of greater-than-expected pay increases in the
last two years.
4. The result of the tiered post-retirement increases of 4%, 3%, or 2%, depending on the
length of time since the initial benefit commenced, resulted in an increase in the
amortization period of 0.7 of a year.
RUDD AND WISDOM9 INC,PAC,E 10
DENTON FIREMEN’S RELIEFXND RETIREMEVr FUND
ACrUARIAL VALUATION
AS OF DECEMBER 31. 2021
Section III
Benefit Improvements
The funding policy in the Meet and Confer Agreement effective October 1, 2019 in Section
4 of Article 12 says that there will be no benefit enhancements until after September 30,
2023. However, the city council agreed on May 17 to a set of tiered post-retirement
increases of 4%, 3%, or 2%, depending on the length of time since the initial benefit
commenced. Perhaps they were influenced by the fact that there has been no ad hocincrease for the retirees since a 2% increase in 2008. In contrast, the retirees in the TMRS
plan have received an increase each January for many years based on 70% of the increasein the CPI
If the city decides to continue contributing at the rate of 18.5% or at some other rate that
could reasonably be assumed to be stable, then we suggest using the same strategy for
future benefit improvements that was successful this year. The idea is to work with the
city to request periodic benefit improvements so that the recommended city contribution
rate based on the city’s funding policy would not need to be increased and the resulting
actuarially determined UAAT,amortization period would be acceptable to the board and to
the city
RUDD AND WISDOM, INC.PAGE 11
DENTON FrREM£N’S RELIEF
WD RETIREMENT FUND ACTUARLAL VALUATION
AS OF DECEMBER 31, 2021
Exhibit 1
Distribution of Firefighters by Age and Service on December 31, 2021with Average Annual Salary
Yearsof
Service0
Under
25
3
4
0
3
0
25-294
4
0
2
4
30-34
4
7
0
5
4
35-39
0
2
40-44
0
0
0
0
0
45-490
0
0
0
0
50-54
0
0
0
0
0
60 orOver
0
0
0
0
0
55-59
0
0
0
0
0
Total
11
17
1
11
11
AverageSal
$65,909
72,092
84, 1 90
91,013
90,478
2
3
4 3
5
6
0
0 0
5
3
5
4
02 0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
00
5
3
3
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
00
00
11
92
8
10
82
1
52
98,850
102,467
117,054
111,864
106,590
000
000
030
10
11
12
13
14
0 02
00
00 0032
020
113,365
129.842
159,597
112,427
112,43 10
0
0
0
0
0
000
0
0
0
0
0
0
0
0
0
0
15
16
17
18
19
000
0
0
0
0
2
0
0
0
0
0
6
3
3
40
6
4
2
2
134
0
1
30
0
1
14
17
15
12
4
7
3
33
24
4
0
116.809
122,327
128,898
141 ,340
151 ,325
20-24
25-29
30-34
35+
00
120.320
144,062
168,997
000000
Totals 1 10 15 37 1 30 1 34 1 37 1 11 o 1 211 1 $111,999
Average §78,194 $88,482 $118,958 $136,351Salary $81,661 $111,008 $121,3 19 $136,842 $111,999
Average age 40.6
Average years of service 13.0
Average age at hire 27.6
RUDD AND WISDOM9 INC,mIB
DENTON FIR£MEN’S RELIEF
£ND RETIREMENT FUND
ACTUARtAL VALUATION
AS OF D£CEMBER 31 . 2021
Exhibit 2
Summary of Pensioner Data
Pensioner Data Used in
December 3 1, 2021 Valuation
Number of
RecipientsType of Benefit
Service Retirement1
Disability Retirement
Vested Terminated (Deferred)2
SUIviving Spouse
Surviving Child
$325,718
0
16,695
40,536
1.350
Total $ 384,299
Comparison of Pensioner Count by Type as ofThe Prior and Current Actuarial Valuations
Type of Benefit Ceased 1 December 3 1, 2021December 31, 20191 New
Service Retirement1
Disability Retirement
Vested Terminated (Deferred)
Surviving Spouse
Surviving Child
Includes three alternate payees receiving benefits according to the terms of a Qualified DomesticRelations Order.
2 Monthly benefit payments are deferred to begin at terminated firefighter’s future retirement date.
I PAG£ 13
D£NTON FIREMEN’S RELIEF
AND RETIREMENT FUND
ACTUARIAL VALUATION
AS OF D£CEMBER 31. 2021
Exhibit 3
Firefighter and Pensioner Reconciliation
Current
PaymentStatus
87
Vested
Terminated
FirefjghtersFirefighters
199
Total
2891. As of December 31, 2019 3
2.Change of statusretrrement (5)
0
0
0
(8)(3)
0
0
0
(16)
5
0
(2)2
0
0
0
0
0
5
0
0
0
0
0
3
0
0
4
0
7
0
0
(2)
2
(8)
0
0
0
disabilitydeathC.
d.suIvivor payment beginswithdrawale.
f.vested termination
g.h.completion of payment
QDRO alternate payeecorrection
J.net changes (7)
28
310
3 . New firefighters 28 0
924. As of December 31, 2021 211
1 Includes three alternate payees receiving benefits according to the terms of a Qualified Domestic
Relations Order (QDRO).
RUDD AND WISDOM9 INC,PAGE 14
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DENTON FIREMEN’S RELIEF
AND RETIR£MENT FUND
ACTUARLAL VALUATION
AS OF DEC£MBER 31. 2021
Exhibit 6
Summary of Asset Data
Mblue
as of
December 3 1, 2021
Allocation
As a Percent
of Grand TotalAsset T'le
Equities
U.S. Large CapU.S. Small/Mid CapInternational
Total
$55,168,000
12,400,000
17.510.000
85,078,000
39.3%
8.8
12.5
60.6
Alternatives
Real Estate
MLP’s/Royal TrustsTotal
14,360,000
6.008.205
20,368,205
10.2
4.3
14.5
Fixed Income
U.S. Core 19,987,550
15.103.822
14.2
Cash Equivalents 10.7
100.0%Grand Total $140,537,5771
The grand total is the preliminary total in the auditor’s final draft. All of the invested amounts were either
from or estimated from the investment consultant’s report, except for an updated value of real estate in
the auditor’s final draft. The cash equivalents amount is the balancing item.
Comparison of Asset Values as of the Priorand Current Actuarial Valuation Dates
December 3 1. 2019 December 3 1. 202 1
$ 103,815,795 $140.537,577Market Value
$126,483,819$98, 109,262Actuarial Value
Actuarial Value as a Percent
90.0%94.5%of Market Value
I PAG£ 17
DENTON FIREMEN9S RELIEF
AND RETIREMENT FUN D ACTUARLAL VALUATIONAS OF D£CEMBER 31. 2021
Exhibit 7
Statement of Changes in Assets
for the Years Ended December 31, 2021 and 2020
12/31/2021 1 12/3 1/20202Additions1. Contributions
a. Employer
b. Employeesc. Total
$ 4,249,7692.894.437
$ 7,144,206
$ 4,069,311
2,771.532
$ 6,840,843
2. Investment Income
a. Interest and dividends
b. Net appreciation in fair valuec. Total
$ 4,355,91417.107.868
$ 21,463,782
$ 3,436,220
9.060.635
$ 12,496,855
3. Other Additions 0 0
Total Additions $ 28,607,988 $ 19,337,698
Deductions
4. Benefit Payments
a. Monthly benefits
b. Lump-sum benefitsc. Total
$ 4,245,925677.348
$ 4,923,273
$ 4,095,1771.560.362
§ 5,655,539
5. Expensesa. Investment-related
b. General administrative
c. Total
$
$
S
257,411
87.866
345,277
5,268,550
$ 182,906116.909
$ 299,815
Total Deductions $ 5,955,354
Net Increase in Assets $ 23,339,438 $ 13,382,344
Market Value of Assets (Fiduciary Net Position)
Beginning of YearEnd of Year $ 117,198,139
$ 140,537,577
$103,815,795
$117, 198,139
Rate of Return
Net of All Expenses
Net of Investment-Related ExpensesGross
17.85%
17.93%
18.17%
0.249'8
11.68%
11.80%
11.99%
0.19%Investment-Related Expenses (Direct)
IFinal draft
2Audited
RUDD AND WISDOM, INC,m
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DENTON FIREMEN’S RELIEF
AND R£TIREMEVr FUND
ACTUARLAL VALUATION
AS OF DECEMBER 31.2021
Exhibit 11
Actuarial Methods and Assumptions
A. Actuarial Methods
1. Actuarial Cost Method
The Entry Age Actuarial Cost Method is an actuarial cost method in which the
actuarial present value of projected benefits of each active firefighter included in
the valuation is allocated as a level percentage of compensation over the period from
age at hire to the last age before 100% assumed retirement. Each active firefighter’snormal cost is the current annual contribution in a series of annual contributions
which, if made throughout the firefighter’s total period of employment, would fund
his expected benefits. Each firefighter’s normal cost is calculated to be a constant
percentage of his expected compensation in each year of employment. The normal
cost for the fund is the sum of the normal costs for each active firefighter for the
year following the valuation date. The normal cost as a percent of payroll reflects
that contributions are made biweekly.
The fund’s actuarial accrued liability is the excess of the actuarial present value of
projected benefits over the actuarial present value of all future remaining normal
cost contributions. The unfunded actuarial accrued liability (UAAT,) is the amount
by which the actuarial accrued liability exceeds the actuarial value of assets. The
UAAT, is recalculated each time a valuation is performed. Experience gains and
losses, which represent deviations of the UAAL from its expected value based on
the prior valuation, are determined at each valuation and are amortized as part of the
newly calculated UAAL.
2. Amortization Method
The UAAT, is assumed to be amortized with level percentage of payroll
contributions (total assumed contribution rate less normal cost contribution rate)
based on assumed payroll growth of 3% per year. The actuarial determination of
the amortization period reflects that contributions are made biweekly, as does the
actuarially determined UAAT, amortization contribution rate with the closed
amortization period.
3. Actuarial Value of Assets Method
All assets are valued at market value with an adjustment made to uniformly spread
actuarial gains or losses (as measured by actual market value investment return vs.expected market value investment return) over a five-year period. The total
adjustment amount shall be limited as necessary such that the actuarial value of
assets shall not be less than 90% of market value nor greater than 110% of marketvalue. See Exhibit 8.
RUDD AND WrSnOM, INC.m
DENTON FIREMEN’S RELIEF
AND RETIRENIEFtr FUND
ACTUARIAL VALUATIONAS OF DECEMBER 31. 2021
B. Actuarial Assumptions
As a part of each actuarial valuation, we review the actuarial assumptions used in the
prior actuarial valuation. The investment return assumption is reviewed using the
building block approach that includes several asset allocations, assumed real rates of
return for each asset class, an assumed rate of investment-related expenses, and an
assumed rate of inflation, with all assumptions for the long-term future. Our economic
assumptions are influenced both by long-term historical experience and by fbture
expectations of investment consultants and economists, but we select the economic
assumptions and discuss them with the board before completing the actuarial valuation.
See our review of the economic assumptions in Appendix A.
We review the termination and retirement experience since the prior valuation and
periodically look back more than two years. We also periodically review the average
salaries by years of service to get insights into the promotion, step, and longevity
compensation patterns for the purpose of reviewing our compensation increase
assumption. For the mortality assumptions, we use an appropriate published mortality
table with projections for improvement beyond the valuation date. We are guided in
our review and selection of assumptions by the relevant actuarial standards of practice.
As a result of our review, we have selected actuarial assumptions we consider to be
reasonable and appropriate for the fund for the long-term future.
1. Investment Return
6.75% per year net of investment-related expenses.
2. Inflation
2.5% per year included in compensation increases and investment return
assumptIons.
3 . Mortality Rates
PubS-2010 (public safety) total dataset mortality tables for employees and for
retirees (sex distinct), projected for morality improvement generationally using the
projection scale MP-2019.
4. Compensation Increases
General increases of 3% per year (2.5% inflation plus 0.5% productivity) in
combination with promotion, step, and longevity increases that average 1.98% per
year over a 30-year career. See Exhibit 12.
RUDD AND WISDOM, INC.I !!!!M1
DENTON FIREMEN’S RELIEF
AND RETmEM£NT FUND
ACTUARIAL VALUATION
AS OF D£CEMBER 31. 2021
5. Retirement Rates
Rate per Year for Firefighters
Eljgjble to Retiree
5%To:a
54-58 15
59-61 30
5062-64
10065
The average expected retirement age for firefighters under age 50 based on theserates is 57.0.
6. RETRO DROP Election
a. Percent of firefighters eligible electing RETRO DROP: 100% of service
retirements eligible to elect at least a 12-month lump sum.
b. Months assumed for lump sum: Maximum they are eligible for, up to 48 months.
7. Termination Rates
See Exhibit 12.
8. Disability Rates
See Exhibit 12.
9. Reduction in Benefit after 2% Years of Disability Retirement
45% weighted average reduction in benefit.
10. Percent Married
90% of the firefighters are assumed to be married at retirement, disability, or death
while employed, with male firefighters having a spouse four years younger and
female firefighters having a spouse four years older. We use actual spouse data
once a monthly benefit is being paid.
RUDD AND WISDOM, INC,[1i!18M1
DENTON FIREMEN’S RELIEF
AND RETIREMEIVr FUND ACTUARL4L VALUATION
AS OF DECEMBER 31. 2021
11. Payment Form for Retirement Benefits Due to Service Retirement, Disability
Retirement, or Vested Termination
•Joint and 2/3 to surviving spouse for the 90% assumed to be married
• Life annuity for the 10% assumed to be single
To the extent optional forms of payment are elected and the amounts are determinedunder an actuarial basis which differs from the basis used in the valuation, actuarial
gains or losses will occur. These gains or losses are expected to be very small and
will be recognized through the valuation process for those retiring since the prior
valuation who made an optional election.
12. Surviving Child’s Death Benefit
None are assumed as a result of future deaths.
13. Firefighters’ Contribution Rate
12.60% of covered pay.
14. City’s Assumed Contribution Rate
For the scenarios with an actuarially determined amortization period for the UAAT .
18.50% of covered payroll for as long as the actuadally determined period.
15. Covered Payroll for First Year Following Valuation Date
Actual (or annualized) pay for 2021 with an adjustment of 2% for each firefighter
to reflect the average effect of the variable general pay increases effective in April
2021 and April 2022.
16. Administrative Expenses
The expenses paid by fund assets for other than investment-related expenses are
assumed to be 0.50% of payroll. The normal cost rate as a percent of payroll is
assumed to be 0.50% of payroll higher to reflect these expenses.
RUDD AND WISDOM, INC.PACE 25
DENTON FIREMEN’S RELrEF
AND RETrR£MErrr FuND ACTUARIAL VALUATION
AS OF D£cEMBER 31. 2021
Exhibit 12
Disability and Termination Rates per 1,000 Active Members
Compensation Increases by Years of Service
Disability Rates Termin
Years of
Service0
1
2
34
5
6
7
8
9
ltion Rates ComDensatiYears of
Service
bn Increases
Increase
Percent
9.18%
9.18
9.18
9.18
9.18
6.09
6.09
6.09
6.09
6.09
Attained Age
20
21
22
23
24
25
26
27
28
29
Rate
0.14
0.15
0.16
0.17
0.18
0.19
0.21
0.23
0.250.28
Rate
60
54
48
42
37
32
27
24
21
19
2
34
5
67
8
9
10
30
31
32
33
34
35
36
37
38
39
0.3 1
0.35
0.40
0.45
0.490.52
0.54
0.57
0.62
0.73
10
11
12
13
14
15
16
17
18
19
17
14
12
11
10
9
9
8
8
8
0
11
12
13
14
15
16
17
18
19
20
6.09
6.09
6.09
6.096.09
3.00
3.00
3.00
3.00
3.00
40
41
42
43
44
45
46
47
48
49
0.92
1.14
1.32
1.48
1.73
2.09
2.55
2.98
3.34
3.62
20 & Over 21
22
23
24
25
26
27
28
29
30
3.00
3.00
3.00
3.00
3.003.00
3.00
3.00
3.00
3.00
50
51
52
53
5455 & Over
3.79
3.92
4.04
4.24
4.56
0.00
31 & Over 3.00
RUDD AND WISDOM, INC,! !!!!M3
DENTON FIREMEN’S RELIEFmD RETIREMENT FUND ACTUARtAL VALUATION
AS OF DECEMBER 31, 2021
Exhibit 13
Definitions
1. Actuarial Accrued Liability That portion, as determined by the particular actuarialcost method used, of the Actuarial Present Value of
future pension plan benefits as of the Valuation Date
that is not provided for by the Actuarial Present Valueof future Normal Costs.
2. Actuarial Assumptions Assumptions as to the occurrence of future events
affecting pension costs, such as: mortality,
termination, disablement and retirement; changes in
compensation; rates of investment earnings and asset
appreciation; and other relevant items.
3 . Actuarially Equivalent Of equal Actuarial Present Value, determined as of a
given date with each value based on the same set of
Actuarial Assumptions.
4. Actuarial Gain (Loss)A measure of the difference between actual
experience and that expected based on the Actuarial
Assumptions during the period between two ActuarialValuation dates. as determined in accordance with the
particular actuarial cost method used.
5 . Actuarial Present Value The value of an amount or series of amounts payableor receivable at various times, determined as of a
given date (the Valuation Date) by the application of
the Actuarial Assumptions.
6. Actuarial Valuation The determination, as of a Valuation Date, of the
Normal Cost, Actuarial Accrued Liability, ActuarialValue of Assets and related Actuarial Present Values
for a pension plan.
7. Actuarial Value of Assets The value of cash, investments and other property
belonging to a pension plan, as determined by a
method and used by the actuary for the purpose of anActuarial Valuation.
RUDD AND WISDOM, INC.PAGE 27
DENTON FIREMEN’S RELIEF
AND RETIREMENT FUND
ACTUARIAL VALUATION
AS OF DECEMB£R 31. 2021n
8. Entry Age Actuarial CostMethod
An actuarial cost method under which the Actuarial
Present Value of the Projected Benefits of eachindividual included in the Actuarial Valuation is
allocated as a level percentage of compensation overthe period from age at hire to the last age before 100%
assumed retirement. The portion of this Actuarial
Present Value allocated to a valuation year is called
the Normal Cost. The portion of this Actuarial PresentValue not provided for at a Valuation Date by theActuarial Present Value of future Normal Costs is
called the Actuarial Accrued Liability. Under this
method, Actuarial Gains (Losses), as they occur,
reduce (increase) the Unfunded Actuarial Accrued
Liability.
9. Plan Year A 12-month period beginning January 1 and endingDecember 3 1 .
10. Normal Cost That portion of the Actuarial Present Value of pension
plan benefits that is allocated to a valuation year bythe actuarial cost method.
11. Projected Benefits Those pension plan benefit amounts that are expectedto be paid at various future times according to the
Actuarial Assumptions, taking into account such
items as the effect of advancement in age and past and
anticipated future qualified service.
12. Overfunded Actuarial
Accrued Liability
The excess, if any, of the Actuarial Value of Assets
over the Actuarial Accrued Liability.
13. Unfunded Actuarial
Accrued Liability
The excess, if any, of the Actuarial Accrued Liabilityover the Actuarial Value of Assets.
14. Valuation Date The date upon which the Normal Cost, Actuarial
Accrued Liability and Actuarial Value of Assets are
determined. Generally, the Valuation Date willcoincide with the end of a Plan Year.
15. Years to Amortize the
Unfunded Actuarial
Accrued Liability
The period is determined in each Actuarial Valuation
as the number of years, beginning with the ValuationDate, to amortize the Unfunded Actuarial Accrued
Liability with a level percent of payroll that is the
difference between the expected total contribution rate
and the Normal Cost contribution rate.
RUDD AND WISDOM, INC.PAGE 28
DENTON FIREMEN’S RELr£F
AND RETIREMEVr FrTND
ACTUARrAL VALUATION
AS OF DECEMB£R 31. 2021
Exhibit 14
Summary of Present Plan
1. Normal Service Retirement Monthly Benefit as a Percent of
Highest 36-Month Average Salary for Each Year of Service 2.59%
2. Normal Service Retirement Eligibility (Minimum)Age 50 and 20 Years
3.Retroactive Deferred Retirement Option Plan (RETRO DROP)
(a)
(b)
(C)
Earliest RETRO DROP benefit calculation date Age 52 and 22 Years48 MonthsMaximum RETRO DROP benefit accumulation period
Earliest employment termination date with
maximum RETRO DROP accumulation period Age 56 and 26 Years
(d)RETRO DROP lump sum includes
(i) Monthly benefits that would have been receivedbetween RETRO DROP benefit calculation date
and end of month of termination of employment,
accumulated contributions made by the firefighter(ii)
after the RETRO DROP benefit calculation date, and
(111)no Interest
4.Initial Disability Retirement Monthly Benefit as a Percentage
of Highest 36-Month Average Salary
(a) Minimum percentage
(b) Additional percentage for each year of service in excess of 20 years
51.80%
2.59%
5.Disability Retirement Monthly Benefit for Firefighters Who
Become Totally Disabled while Employed(a) For initial 30-month period, is (i) plus (ii) if not able to
perform job in fire department
(i) Minimum monthly amount based on 20 years
(ii) Additional monthly amount per year of service in
excess of 20 years
Following initial 30-month period, is the greater of (i) and (ii)
(i) Initial benefit reduced by the portion of the initial benefit
equal to estimated annual residual earning capacity
divided by annual base earnings
(ii) Initial benefit multiplied by percentage of disability
Upon attaining eligibility for normal retirement, the member’s
vested retirement benefit becomes payable if the disabilitybenefit has been reduced or terminated
(b)
(C)
i [1!18M1
DENTON FIREM£N’S RELIEF
AND RETrREMEVr FUND
ACTUARtAL VALUATION
AS OF D£C£MBER 31. 2021
6. Vested Terminated Benefit Eligibility
(Benefit Deferred to Normal Retirement Age)10 Years
7.Surviving Spouse’s Monthly Death Benefit as a Percent of
Highest 36-Month Average Salary for Each Year of Service
for Death while an Active Firefighter
(a) Minimum percentage
(b) Additional percentage for each year of service in excess of 20 years
34.53%
1.7396
8. Surviving Spouse’s Monthly Death Benefit as a Percent of
Highest 36-Month Average Salary for Each Year of Service
for Death while Eligible to Retire as an Active Firefighter 2.599,’6 x 96%
9. Surviving Children’s Monthly Benefit as a Percent of Surviving
Spouse’s Benefit
(a) When the spouse is receiving a benefit, for each child
(b) When the spouse is not receiving a benefit or there is no spouse
20cI/o
100%
10. Contributions as a Percent of Payroll by:
(a) Firefighters
(b) City of Denton
12.60%
Funding Policy
11. The normal form of annuity payment at retirement is a Joint and Two-Thirds to
Surviving Spouse, and payment is the first day of each month.
12.A Social Security Leveling Option optional form of payment is available to firefighters
eligible for a service retirement benefit and to surviving spouses of firefighters who die
while employed where the surviving spouse is between ages 45-60. A Joint and 100%
to Surviving Spouse Optional form of payment and a Joint and 50% to Surviving
Spouse are also available to firefighters eligible for a service retirement benefit.
13.Salary used to determine the Highest 36-Month Average Salary includes all elements
of pay except for (a) lump sum distributions upon termination for unused sick leave or
vacation and (b) overtime pay earned after June 13, 2007 for special deployments in
excess of $2,000 per biweekly pay period. The average is based on the highest
consecutive 78 biweekly pay periods during active participation in the fund.
14. Refund of firefighters’ accumulated contributions without interest will be made to
firefighters who terminate employment and either are not eligible for any other benefit
from the fund or request a refund from the fund.
15. A lump sum death benefit will be payable upon the death of a participating member of
the fund in an amount equal to the current annual salary of the participating member.
RUDD AND WISDOM, INC.pIPREIBED
DENTON FIREMEN’S RELIEF
AND RETIREMENT FUND
ACTUARLAL VALUATION
AS OF DECEMBER 31, 2021
Appendix A
Review of the Actuarial Economic Assumptionsfor the December 31, 2021 Actuarial Valuation
Section 1. Asset Allocation and Investment Return Assumption Development
Gross Annual
Real Rate of
Investment
Return (ROR)1
Asset Allocation
Actual Actual Current More Fixed
12/31/20192 12/31/20213 Target4 IncomeAsset Class
EquitiesDomestic
Large Cap
Small/Mid CapInternational
6.5
7.0
7.0
37%87
52
39%
9
40%
10
40%
87
55
Fixed Income
MPLs, Royalty TrustsReal Estate
Cash
Total
1.5
7.0
4.5
0.0
166
12
14
100%
14
4
10
11
100%
15
8
15
2
100%
20
5
10
10
100%
Weighted Average Gross Real ROR Assumption 5.02%
4.52%
5.46%
4.96%
4.75%
4.25%Weighted Average Net Real ROR Assumptions
Possible Theoretical Annual Investment Return Assumption:Net Real ROR plus Assumed Annual Rate of Inflation
Assumed 2.50% Inflation 7.02%7.46% 6.75%
A gross real rate of return is an assumed total annual rate of investment return, before expenses, that is in excess
of the assumed annual inflation rate. These are long-term assumptions made by Rudd and Wisdom, Inc.
2 This allocation is from the investment consultant’s 12/31/2019 report.
3 This allocation is from a combination of the investment consultant’s 12/3 1/2021 report and the auditor’s final12/3 1/2021 draft.
4 This allocation is from the investment consultant’s 12/31/2021 report.
5 A weighted average Net Real ROR is an annual rate equal to the weighted average Gross Real ROR reduced byinvestment-related expenses of an assumed annual rate of 0.5%.
RUDD AND WISDOM, INC.PAGE 31
DENTON FIREMEN9S RELIEF
AND RETIREMENT FUND ACTUARIAL VALUATION
AS OF DECEMBER 31, 2021
Appendix A (continued)
Section 2. Price Inflation in the USA
Average Annual Rates of Increase in the CPI-U
Years
(Dec. to Dec.)
1956 – 2021
1961 – 2021
1966 – 2021
1971 – 2021
1976 – 2021
1981 – 2021
1986 – 2021
1991 – 2021
1996 – 2021
2001 – 2021
Number
of Years AverageAnnual Increase
65
60
55
50
45
40
35
30
25
20
3.62%
3.79
3.96
3.90
3.54
2.76
2.68
2.37
2.28
2.31
Most inflation forecasts are for 10 years or less. For example, the average 10-year forecast in the
June 2022 Livingston Survey published by the Federal Reserve Bank of Philadelphia was 2.50%.
However, 10 years is too short a forecast period for a public employee defined benefit pensionplan. In the 2022 annual report of the OASDI Trust Funds (Social Security), the ultimate inflation
assumptions for their 75-year projections are 3.0%, 2.4%, and 1.8% for the low-cost, intermediate,
and high-cost assumptions, respectively. Looking at the average annual increase in the CPI-U
over historical periods of 30 to 65 years above and considering the Social Security forecasts, we
believe that reasonable assumed rates of inflation for the long-term future would range from 2.25%to 3.259“a
RUDD AND WISDOM, INC.1 :11!!EXD