(6) Pension Plan
(a) Plan Description
The City contributes to the Revere Retirement System ("System"), a single-employer, public employee retirement system that acts as the investment and administrative agent for the City. The City's payroll for employees covered by the System for the year ended June 30, 1995, was $12,408,769. Public school teachers are covered by the Commonwealth of Massachusetts Teachers' Retirement System (TRS) to which the City of Revere does not contribute. The City's payroll covered by TRS was $18,093,796 in 1995. Total payroll for the City was $30,502,565.
The System and the TRS are contributory defined benefit plans covering all City employees and teachers deemed eligible.
Instituted in 1940, the System is a member of the Massachusetts Contributory System and is governed by Chapter 32 of the Massachusetts General Laws. Membership in the System is mandatory immediately upon the commencement of employment for all permanent, full-time employees. At January 1, 1995 (the latest date such information is available) membership in the System consists of:
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CITY OF REVERE, MASSACHUSETTS
Notes to General Purpose Financial Statements
Number of Members
Retirees and beneficiaries
currently receiving benefits 577
Active employees 408
Inactive members 34
1,019
Both systems provide for retirement allowance benefits up to a maximum of 80% of a member's highest three-year average annual rate of regular compensation. Benefit payments are based upon a member's age, length of creditable service, level of compensation and group classification. Members joining the System after January 1, 1979, were subject to a cap of $30,000 on the level of compensation upon which their benefits were calculated. Effective December 21, 1990, the $30,000 cap was removed.
Members of both systems become vested after 10 years of creditable service. A retirement allowance may be received upon reaching age 65 or upon attaining 20 years of service. The systems also provide for early retirement at age 55 if a Participant (1) has a record of 10 years of creditable service, (2) was on the City payroll on January 1, 1978, (3) voluntarily left City employment on or after that date, and (4) left accumulated annuity deductions in the fund. Active members contribute either 5, 7 or 8% of their gross regular compensation depending on the date upon which their membership began. Employees hired after January 1, 1979 contribute 10% of their compensation over $30,000.
The systems also provide death and disability benefits.
(b) Significant Accounting Policies and System Assets
The accounting records of the System are maintained on a calendar year basis in accordance with the standards and procedures established by the Commissioner of the Public Employee Retirement Administration (PERA).
The System participates in the Pension Reserves Investment Trust ("PRIT"). PRIT was created in 1984 by the Commonwealth of Massachusetts under Chapter 661 of the Acts of 1983 to serve as the investment portfolio for the assets of state and local retirement systems joining PRIT. PRIT is managed by the Pension Reserves Investment Management Board and has been operating since October 1, 1984.
PRIT consists of two funds, the Capital Fund and the Cash Fund. The Capital Fund serves as the long-term asset portfolio and includes stock, bonds, money market investments, international investments, real estate and other alternative investments. Shares in the PRIT Capital Fund are valued at market. The Cash Fund consists of short-term investments which are used to meet the System's liquidity requirements. Shares in the PRIT Cash Fund have been reflected as cash equivalents.
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CITY OF REVERE, MASSACHUSETTS
Notes to General Purpose Financial Statements
Cash and investments of the System at December 31, 1994, are summarized as follows:
Book value Market value
Cash $ 2,224,249 2,224,249
PRIT Capital Fund (25,165,644 shares) 29,349,482 29,349,482
Total $ 31,573,731 31,573,731
(c) Funding Status and Progress
The amount shown below as the "Pension Benefit Obligation" is a standard disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases estimated to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status of the System on a going-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among systems.
The Pension Benefit Obligation was computed as part of an actuarial valuation performed as of January 1, 1995. This valuation reflects the effects of the removal of the $30,000 compensation cap and other changes resulting from the adoption of Chapter 32, Section 22D of the Massachusetts General Laws. Significant actuarial assumptions used in the valuation include (a) a rate of return on the investment of present and future assets of 8% a year compounded annually, (b) projected salary increases of 5-1/2% a year compounded annually, (c) mortality in accordance with the 1971 Group Annuity Mortality Table, set back one year for non-disabled males, six years for non-disabled females, and set forward nine years for disabled males and four years for disabled females, (d) terminations in accordance with Table T-5 of the Actuary's Pension Handbook based on moderate turnover (no terminations for police), (e) retirements in accordance with experience of the System, and (f) that the Commonwealth will continue the current practice of reimbursing the System for annual cost-of-living increases.
Total unfunded pension benefit obligation applicable to the System was $47,297,000 at January 1, 1995, as follows:
Pension benefit obligation:
Retirees and beneficiaries currently receiving benefits and
terminated employees not yet receiving benefits $ 57,944,000
Current employees:
Accumulated employee contributions, including allocated
investment earnings 10,078,000
Employer-financed vested 9,084,000
Employer-financed nonvested 2,125,000
Total pension benefit obligation 79,231,000
Net assets available for benefits, at market value 31,934,000
Unfunded pension benefit obligation $ 47,297,000
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CITY OF REVERE, MASSACHUSETTS
Notes to General Purpose Financial Statements
(d) Contribution Requirements and Contribution Made
The System's funding policy is governed by Section 22D of Chapter 32 of the Massachusetts General Laws. Accordingly, the City of Revere is required to fund each year the actuarially determined normal cost plus an amount to amortize the unfunded liability for retirees and active employees by June 30, 2007 and June 30, 2024, respectively. The Commonwealth of Massachusetts currently reimburses the System on a quarterly basis for the portion of benefit payments owing to cost-of-living increases granted after the implementation of Proposition 2-1/2.
The City's contribution to the System for the calendar year December 31, 1994 of $5,979,034 was made in accordance with the funding policy described above and was funded as follows: The City contributed $4,971,905 (40% of current covered payroll); employees contributed $1,007,129 (8% of current covered payroll).
(e) Trend Information
Trend information showing the System's progress in accumulating sufficient assets to pay benefits when due is presented in the System's separately issued financial statements.
(f) Post-Retirement Benefits
All retired employees eligible for pension benefits as well as teachers covered under the TRS receive certain post-retirement benefits including major health and life insurance. Benefits received and costs borne by retirees are consistent with those of active employees. The City's cost of these post-retirement benefits for fiscal 1995 was approximately $1,103,000, which was accounted for on a pay-as-you-go basis.