HomeMy WebLinkAboutA001 - Letter dated March 22, 1993 to Director of Finance from Milliman & Robertson, Inc. Alk
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MILLIMAN & ROBERTSON, INC.
Actuaries and Consultants
Suite 308
8990 West Dodge Road
Omaha,Nebraska 68114-3379
Telephone:402/393-9400
Fax:402/593-1037
March 22, 1993
Mrs. Alice J. Carroll
Director or Finance
Ames Municipal Utility Retirement System
515 Clark Avenue
Ames, Iowa 50010
Re: Benefit Improvement Cost Studies
Dear Alice:
Attached is a schedule of the cost results, as calculated by us, for the proposed benefit
improvements to be made as of July 1, 1993 under the Ames Municipal Utility Retirement
System. Item 1 relates to the current System without any benefit changes and is included in the
schedule for an easy point of reference.
The formula change is from 1.90% to 1.95% for annual benefit accruals. After five years of
retirement, the increase to 2.1% (per year of service) applies. Corresponding death benefit .
increases are included in the costs. Retirees with less than five years of retirement were assumed
to get an increase corresponding to the formula increase from 1.90% to 1.95%.
The COLA increases essentially start the year after a person's benefit is paid at the 2.1% accrual
benefit level. For disabilities, the COLA starts July 1, 1993 for those disabled five years or
longer; and for those disabled less than five years, the COLA starts after the person has been on
disability for five years.
Costs are shown with 43% of the total to employees and 57% to the Utility.
Albany • Atlanta • Boston • Chicago • Cincinnati • Dallas • Denver • Hartford • Houston
Indianapolis • Irvine • Los Angeles • Milwaukee • Minneapolis • New York • Omaha • Philadelphia
Phoenix • Portland • SL Louis • Salt lake City • San Diego • San Francisco • Seattle • Washington.D.C.
Internationally WOODROW MILLLMAN
Australia • Austria • Belgium • Bermuda • Canada • Channel Islands • Denmark
France •Germany • Ireland • Italy • Mexico • Netherlands • New Zealand • Norway
Philippines • Spain 9 United Kingdom • United States • West Indies
Mrs. Alice J. Carroll - 2 - March 22, 1993
The costs for the COLA are consistent with our July 1, 1990 studies. Back then the formula was
1.80% and the five year step up was 2.0%. You are now at 1.90% and the step up rate is 2.1%.
The cost of the COLA is tied to the stepped up benefit level, so the costs developed in this study
are in line with our 1990 study results.
All actuarial assumptions used in the studies are the same as those used in the regular valuation
as of July 1, 1992; and the data used was the same as that used in said valuation.
Call me if you have any questions on this.
Yours very truly,
r
Denis J. Sullivan, F.S.A., J.D.
Consulting Actuary
DJS:dw
M LLIMAN&ROBERTSON,INC.
AMES MUNICIPAL RETIREMENT SYSTEM
Actuarial Cost Studies as of July 1, 1992
Total Cost Employee utility
as % Contributions Contributions
of Pay 43% of Total 57% of Total
1. Current System, regular
valuation 14 . 08% 6. 05% 8 . 03%
2 . 1. 95% annual benefit formula,
stepping up to 2 . 1% after
five years on retirement 14 . 49% 6. 23% 8 . 26%
3 . Current plan with auto-
matic 1. 25% annual COLA
starting after six years
on retirement 18 . 85% 8 . 11% 10 . 74%
4 . Combine items 2 and 3 19 . 26% 8 . 28% 10.98%
MILLIMAN & ROBERTSON. txc