COPERS

1. City of Phoenix Retirees' Association COPERS City of Phoenix Employees’ Retirement System March 2011

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

3. Agenda • Post-Retirement Increases • PEP • 13th Check • Calculation Process • Status • Future Outlook • Update on Pension Reform Task Force • Questions

4. Economic & Market Overview – Ryan Harvey, R.V. Kuhns & Associates, Inc. 2010 Equity market rebound continued Additional U.S. Government stimulus Federal Reserve maintained historically low rates U.S. economy officially entered into the current economic recovery, following a 18-month long recession that ended June 2009 4

5. Economic & Market Overview – Ryan Harvey, R.V. Kuhns & Associates, Inc. Generally Improving Economic Indicators Positive: Unemployment Rate: 9.7%  9.4% GDP Growth: 0.2%  3.3% (9/30/2010) Leading Economic Index: 106.2  112.4 Coincident Economic Index: 100.0  101.9 Neutral: Inflation Expectations: 2.4%  2.3% Negative: Consumer Confidence Index: 53.6  52.5 5

6. Economic & Market Overview – Ryan Harvey, R.V. Kuhns & Associates, Inc. 6

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

8. Funded Ratio Aggregate 2009 Funding Level for Public Funds: 79.8% ** ** Source: NASRA Public Funds Survey Valuation Date (June 30/December 30*)

9. History of Contributions Employee Contribution 5% per charter

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

11. 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

12. 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 (not less than zero) or percentage supported by excess returns reserve • Based on excess investment returns reserve

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

14. Average Rate of return (5 cal year)

15. PEP Pension Increases – Calculation Process (2) Are there “Excess Earnings”? • Earnings over 8% • Rate is in Charter • Equals the target rate used by actuary • 2006-2010 Average = 4.10%

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

17. 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 • 2011 – No addition, minimal balance exists • Determine increase supported by reserve balance = 0.05%

18. PEP

19. PEP Pension Increases – Calculation Process (4) Phoenix-Mesa CPI for prior year (5) PEP is lesser of CPI (not less than zero) or amount supported by reserve balance

20. 2011 PEP Calculation • Five Year Investment Earnings 4.10% • (2) Excess Earnings? No • (3) Deposit to PEP Reserve? No • Increase supported by Reserve 0.05% • (4) Phoenix-Mesa CPI for 2010 0.6% • (5) 2011 PEP ? No

21. Pension Equalization Program (PEP) 10 year Cumulative: 19.90% 10 year Average: 1.99%

22. 13th Check – Pension Increases – Calculation Process (1) Phoenix-Mesa CPI for prior year

23. 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 = 0.6% / 2 = 0.3% • PEP Reserve = Minimal • 2011 13th Check = Unlikely

24. 13th Check

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

26. Update on Pension Reform Task Force -Rick Naimark, Deputy City Manager • Membership • Charge and timeline • Next steps: • Pension Consulting Services • Legal Services

27. Questions?