COPERS

1. City of Phoenix Retirees' Association COPERS City of Phoenix Employees’ Retirement System March 2009

2. Agenda • Economic Overview • COPERS’ Financial Condition • Funded Status • Employer Contributions

3. Agenda • Post-Retirement Increases • PEP • 13th Check • Calculation Process • Status • Future Outlook • Questions

4. Economic Overview – Ryan Harvey, RV Kuhns & Assoc. • 2008 • Market Volatility • U.S. Government Banking Plan • Federal Reserve cut rates • December 31, 2008 Unemployment Rate = 7.2% • 4.9% at beginning of 2008 • U.S. economy officially entered into a recession during late 2007

5. Economic Overview – Ryan Harvey, RV Kuhns & Assoc.

6. COPERS’ Financial Condition • Funded Status • Employer Contributions

7. Funded Ratio

8. History of Contributions Employee Contribution 5% per charter

9. Post-Retirement Increases • PEP • 13th Check • Calculation Process • Status • Future Outlook

10. 13th Check One time payment Eligible if retired by June 30th of payment year Paid with December pension payment Lesser of ½ of prior year’s CPI increase or 3%; minimum of 1%; if excess returns reserve balance sufficient Based on excess investment returns reserve Pension Increases

11. Pension Increases PEP • Permanent increase • Eligible if retired 36 months by January 1st • Paid with April pension payment retroactive to January • Lesser of prior year’s CPI increase or percentage supported by excess returns reserve • Based on excess investment returns reserve

12. PEP Pension Increases – Calculation Process (1) Determine Investment Earnings Average over last five calendar years

13. Average Rate of return (5 cal year)

14. PEP Pension Increases – Calculation Process (2) Are there “Excess Earnings”? • Earnings over 8% • Rate is in Charter • Equals the target rate used by actuary • 2004-2008 Average = 2.25%

15. Average Rate of return (5 cal year) Actuarial Return Target = 8%

16. PEP Pension Increases – Calculation Process (3) If yes, an amount is added to the “PEP Reserve” • A portion also goes to the retirement fund to help fund the general obligations of the fund • 2009 – No addition but balance exists due to previous activity • Determine increase supported by reserve balance = 1.7%

17. PEP

18. PEP Pension Increases – Calculation Process (4) Phoenix-Mesa CPI for prior year (5) PEP is lesser of CPI or amount supported by reserve balance 1.7%

19. 2009 PEP Calculation • Five Year Investment Earnings 2.25% • (2) Excess Earnings? No • (3) Deposit to PEP Reserve? No but PEP Reserve balance of approx. $15 million will support increase of 1.7% • (4) Phoenix-Mesa CPI for 2008 3.5% • (5) 2009 PEP 1.7%

20. Pension Equalization Program (PEP) 10yr Cumulative: 26.6% 10yr Average: 2.7%

21. 13th Check – Pension Increases – Calculation Process (1) Phoenix-Mesa CPI for prior year

22. 13th Check – Pension Increases – Calculation Process (2) 13th Check is lesser of ½ CPI or 3% with minimum of 1% if PEP Reserve balance is sufficient • ½ CPI = 3.5% / 2 = 1.75% • PEP Reserve = Unknown • Determined after payment of 2009 PEP + end of year adjustments • 2009 13th Check = Unknown

23. 13th Check *Minimum rate per amended City Charter

24. Future Outlook for Post-Retirement Increases • PEP Reserve • Investment/Economic Conditions

25. Questions?

26. City of Phoenix Retirees' Association COPERS City of Phoenix Employees’ Retirement System March 2009