EMERGENCY MANAGER CITY OF DETROIT

ORDER No. 16

ORDER DIRECTING CERTAIN CITY EMPLOYEES TO PROVIDE INFORMATION TO THE EMERGENCY MANAGER

By THE AUTHORITY VESTED IN THE EMERGENCY MANAGER FOR THE CITY OF DETROIT

PURSUANT TO MICHIGAN'S PUBLIC ACT 436 OF 2012, KEVYN D. ORR, THE EMERGENCY MANAGER,

ISSUES THE FOLLOWING ORDER:

Whereas, on March 28, 2013, Michigan Public Act 436 of2012 ("PA 436") became effective and Kevyn D. Orr became the Emergency Manager ("EM") for the City of Detroit (the "City") with all the powers and duties provided under PA 436; and

Pursuant to section 9(2) of PA 436, the EM "shall act for and in the place and stead of" the Detroit Mayor and City Council; and

Section 9(2) of PA 436 also grants the EM "broad powers in receivership to rectify the financial emergency and to assure the fiscal accountability of the [City] and the [City's] capacity to provide or cause to be provided necessary governmental services essential to the public health, safety, and welfare;" and

Pursuant to section 10(1) of PA 436, the EM may "issue to the appropriate local elected and appointed officials and employees, agents, and contractors of the local government the orders the emergency manager considers necessary to accomplish the purposes of this act, including, but not limited to, orders for the timely and satisfactory implementation of a financial and operating plan" or "to take actions, or refrain from taking actions, to enable the orderly accomplishment of the financial and operating plan;" and

Section 12(1)(a) of PA 436 authorizes the EM, "notwithstanding any charter

1

I I--, i

provision to the contrary," to "[a]nalyze the factors and circumstances contributing to the financial emergency of the local government and initiate steps to correct the condition;" and

Section l2(1)(f) of PA 436 authorizes the EM, "notwithstanding any charter provision to the contrary," to "[e]xamille all records and books of account, and require under the procedures of the unifonn budgeting and accounting act, 1968 PA 2, MCL 141.421 to 141.440a, or 1919 PA 71, MCL 21.41 to 21.55, or both, the attendance of witnesses and the production of books, papers, contracts, and other documents relevant to an analysis of the financial condition of the local government;" and

Section 12(1)( ee) of P A 436 authorizes the EM, "notwithstanding any charter provision to the contrary," to "[t]ake any other action or exercise any power or authority of any officer, employee, department, board, commission, or other similar entity of the local government, whether elected or appointed, relating to the operation of the local government. The power of the [EM] shall be superior to and supersede the power of any of the foregoing officers or entities;" and

Pursuant to section 27 of PA 436 "local elected and appointed officials and employees, agents, and contractors of a local government shall promptly and fully provide the assistance and infonnation necessary and properly requested by the ... emergency manager in the effectnation of [his] duties and powers and of the purposes of [PA 436];" and

The City is experiencing a financial emergency with $18 billion in estimated liabilities. Collectively, the City of Detroit General Retirement System ("GRS") and the City of Detroit Police and Fire Retirement System ("PFRS" and, together with GRS, the "Pension Funds") are estimated to be underfunded by approximately $3.5 billion; and

The EM was appointed to, among other things, safeguard and assure the financial accountability of the City; provide or cause to be provided the necessary services essential to the public health, safety, and welfare; and prescribe remedial measures to address the City'S fmancial emergency. This requires the EM to examine certain records, books and other documents, data and infonnation related to the Pension Funds as part of the City's overall financial and operational restructuring; and

The EM has detennined that certain City employees, in their City offices, possess or have access to records, books and other docwnents, data and infonnation related to the Pension Funds; and

The EM believes, at this point in time, that to effectively address the City's financial emergency it is in the City's best interests to require that certain City employees provide the EM and his advisors with certain records, books and other documents, data and infonnation related to the Pension Funds in their possession; and

It is hereby ordered that:

2

1 I

I . Those individuals identified on Appendix A are hereby directed to provide the EM with records, books and other documents, data . and infonnation in their possession in response to the questions and infonnation and data requests attached hereto as Appendix C, and to complete the exhibits to Appendix C, no later than Friday, October 11,2013.

2. Those individuals identified on Appendix B are hereby directed to provide the EM with records, books and other documents, data and infonnation in their possession in response to the questions and infonnation and data requests attached hereto as Appendix D, and to complete the exhibits to Appendix D, no later than Friday, October II, 2013.

3. City employees referenced in paragraphs 1 and 2 of this Order shall supplement any responses to the questions and infonnation requests contained in Appendices C and D as necessary to ensure the accuracy of the answers provided in response to such requests.

4. If any component of this Order is declared illegal, unenforceable or ineffective by a court of competent jurisdiction, such component shall be deemed severable so that all other components contained in this Order shall remain valid and effective.

5. This Order is effective immediately upon the date of execution below and shall remain in full force and effect until the City's financial emergency has been rectified in accordance with section 22 ofPA 436.

6. The EM may modify, amend, rescind, replace, supplement or otherwise revise this Order at any time.

7. This Order shall be distributed to the Mayor, City Council members and all department heads.

BY:~.rL--Dated: September~ 2013

ergency Manager ity of Detroit

cc: State of Michigan Department of Treasury Mayor David Bing Members of Detroit City Council

3

APPENDIX A

General Retirement System 1. David Clark 2. Tasha Cowan 3. Lou Hatty 4. Cheryl Johnson 5. John Riehl 6. Saunteel Jenkins 7. Medina Noor 8. Cynthia Thomas

I I

1 I I

I ..

Police & Fire Retirement System I. MaikDiaz 2. Edsel Jenkins 3. Cheryl Johnson 4. Brenda Jones 5. Tanya Stoudemire 6. James Moore 7. Sean Neary 8. George Orzech 9. Jeffrey Pegg 10. Matthew Gnatek 11. Lamont Satchel 12. James Edwards 13. Cynthia Thomas

APPENDIXB

d

I I

I I i

APPENDIXC

Supplemental Information and Document Request Relating to the City of Detroit General Retirement System ("GRS" or "the System")

RE: (1) Annuity Saving Fund and 13th Checks; (2) General Information Relating to System Operation Based Upon Most Recent Valuation Report and Data Previously Provided to the Emergency Manager; (3) 1998 Defined Contribution PlanlElection for Retroactive Coverage in the Event of In-Service Deatb

INFORMATION AND DOCUMENT REQUEST RE: ANNUITY SAVINGS FUND AND 13m CHECKS

1. Completion of the attached chart (Exhibit l/Regular Interest Crediting plus Excess Earnings Allocation). Regular Interest has the meaning and usage given such term in City of Detroit Ordinance §§ 47-1-21 and 47-2-18, as declared by the Board of Trustees of the City of Detroit General Retirement System ("Board") for a fiscal year. Excess Earnings means the balance of the Income Fund in a fiscal year after crediting Regular Interest to the funds of the GRS pursuant to the provisions of City of Detroit Ordinance § 47-2-18.

2. All available information and documentation supporting determination of the total amount of Excess Earnings from fiscal year ending ("FYE") June 30, 1985 through FYE June 30, 2013 ("Request Period"), including, but not limited to:

a. Documents, reports and analysis summarizing the total amounts credited to the Income Fund at the end of each fiscal year during the Request Period.

b. Documents, reports and analysis showing the total amounts credited in the aggregate to GRS Funds as Regular Interest and the amounts credited to each individual GRS Fund as Regular Interest for each fiscal year during the Request Period, including the fund balances used to determine the Regular Interest to be credited to each individual GRS

. Fund.

c. Documents, reports and analysis supporting the determination of Regular Interest declared by the Board (i.e., actuarial reports, other) for each fiscal year during the Request Period.

d. Any relevant Board minutes (including opinions of legal counsel and/or actuarial reports delivered or discussed at Board meetings)

J 1

I i

documenting consideration, determination and/or declaration of Regular Interest, the determination of the amount of Excess Earnings, and the methodology for allocating Excess Earnings, including minutes from all Board meetings where interest allocations and distributions were discussed, during the Request Period.

3. All available information and documentation relating to interest credited to the Annuity Savings Funds (" ASF") during the Request Period, including, but not limited to:

a. Documents, reports and analysis summarizing the Regular Interest credited to the ASF, along with the ASF balances and any underlying additional criteria used to determine Regular Interest credited to the ASF for the Request Period.

b. Documents, reports and analysis summarizing interest in excess of Regular Interest ("Special Interest") credited from Excess Earnings to the ASF, along with the ASF balances and any underlying additional criteria used to determine Special Interest credited to ASF for the Request Period.

c. A description of the process used to determine amounts allocated to the ASF during the Request Period.

d. The document(s) that authorized or approved the allocation of Special Interest to the ASF during the Request Period.

e. Documents, reports, analysis, and any additional information relating to the basis for the Board's determination of Regular Interest and Special Interest credited to the ASF (i.e., actuarial reports, other) for each fiscal year during the Request Period.

f. Any relevant Board minutes (including opinions oflegal counsel and/or actuarial reports delivered or discussed at Board meetings) documenting consideration, determination and/or approval of crediting Regular Interest and/or Special Interest to the ASF (minutes from all Board meetings where interest allocations and distributions were discussed) during the Request Period.

I I

4. All available information and documentation supporting the additional pension payments periodically made to retirees (commonly known as the "13th Check") during the Request Period, including, but not limited to:

a. Documents, reports and analysis summarizing amounts distributed via the 13 th Check during the Request Period.

b. Description of the internal process used to determine the amounts to be distributed via the 13 th Checks for each fiscal year during the Request Period.

c. Documents, reports and analysis supporting the basis for amounts distributed via the 13 th Checks (i.e., actuarial reports, other) for each fiscal year during the Request Period.

d. Any relevant Board minutes documenting consideration, determination and/or approval of payment of the 13 th Checks or any additional payments to retirees out of System earnings during the Request Period.

e. A description of the internal mechanics related to distribution of the 13 th Checks, including, (i) the timing of the distributions, (ii) the manner in which checks were distributed (Le., mail, direct deposit), (iii) the documents authorizing or approving the distributions, and (iv) the departments and personnel typically involved in making the

payments.

5. Documents, reports and analysis relating to Regular Interest and Excess Earnings credited to the GRS Pension Accumulation Fund or Pension Reserve Fund (other than the Fund described in paragraph 6 below) during the Request Period,

including, but not limited to:

a. A description of the process used to determine the Regular Interest and

Excess Earnings credited to the Pension Accumulation Fund or Pension Reserve Fund (other than the Fund described in paragraph 6 below) for each fiscal year during the Request Period.

b. Any relevant Board minutes documenting consideration, determination and/or allocation of Regular Interest and Excess Earnings to the Pension Accumulation Fund or Pension Reserve Fund (other than the Fund described in paragraph 6 below), including minutes from all

J

I I I

I i

meetings at which the allocation of Excess Earnings was discussed, during the Request Period.

6. Documents, reports and analysis relating to establishment and operation of the Retiree Excess Earnings Reserve Fund ("REERF"), including, but not limited to:

a. Docwnents relating to the establishment of the REERF and the Board's authority to establish the REERF (including opinions oflegal counsel).

b. Docwnents, reports and analysis relating to the Excess Earnings directly or indirectly transferred to the REERF from the Income Fund for each fiscal year during the Request Period.

c. Docwnents, reports and analysis relating to disbursements made from the REERF for each fiscal year during the Request Period.

d. Any relevant Board minutes docwnenting establishment of the REERF, amounts to be transferred to the REERF and amounts disbursed from the REERF, including minutes from all meetings where such items were discussed, during the Request Period.

7. Completion of the five (5) charts that are part of Exhibit 2 which request certain information relating to ASF distributions (including direct and indirect transfers or rollovers to the 1998 Defined Contribution Plan or the City of Detroit Eligible Deferred Compensation Plan, another retirement plan or IRA) for each ofFYE June 30, 2009 through FYE June 30, 2013 ("Distribution Years"). In particular, information is requested on (i) the number of individuals who took ASF distributions during the Distribution Years, and (ii) general information on the size of the distribution made to such distributees.

8. Completion ofthe attached chart (Exhibit 3/Actual Fund Returns (%» which requests information relating to the actual market rate of return on GRS assets for each ofFYE June 30,1985 through FYE June 30,2013.

._--------------------------_._._. __ ... -.. _ ...... __ ._ ..

GENERAL INFORMATION RELATING TO SYSTEM OPERATION BASED UPON 2012 DRAFT VALUATION REPORT AND DATA PREVIOUSLY PROVIDED TO THE EMERGENCY MANAGER!

1. Confirm that all participants in pay status receive a COLA. lfnot, describe how participants in pay status that do not receive a COLA are identified in the 2012 Data.

2. Confirm that the "Paid Annuity" (as such term is used in the Data Layouts) amount does not receive a COLA. Also confirm that the "Current Pension" (as such term is used in the Data Layouts) amount is separate from the "Paid Annuity" amount.

3. Confirm that the "Paid Annuity" has the same form of payment as the "Current Pension". If not, confirm that it is always paid as a straight life annuity. Confirm that the equalization option does not apply to the "Paid Annuity".

4. Confirm whether disability retirees receive the applicable COLA from the date of disability or from the date of conversion to a retirement benefit.

5. GRS participants in pay status were reported in the 2012 Data with an "Option" code and a separate "Popup Code". The following combinations were in the 2012 Data. Please review the form of payment to be valued and indicate what, if any, corrections are necessary. (Note that only 4 members have Popup Code B and we presume that is a data error as GRS only has one popup option.)

Option code Popup Code Form of Payment To Be Valued

o - Straight Life blank Straight life

o - Straight Life 0 Straight life

o - Straight Life A Straight life

1 - Straight Life blank Straight life

1 - Straight Life 0 Straight life

1 - Straight Life A Straight life

1 The requests relating to data are in reference to the Excel document entitled "2012 Detroit Data Layouts" (the "Data Layouts") and the 2012 individual participant data provided ("2012 Data") that were provided to the Emergency Manager in response to the Document Request Pursuant to PA 436, dated April 25, 2013.

~-----------------------------------------------------------

i I

I - Straight Life B Straight life

2-100%J&S blank Joint & 100% survivor without pop-up

2-100%J&S 0 , Joint & 100% survivor without pop-up

2-100%J&S A Joint & 100% survivor with pop-up

2-100%J&S B Joint & 100% survivor with pop-up

3 -50%J&S blank Joint & 50% survivor without pop-up

3 -50%J&S 0 Joint & 50% survivor without pop-up

3 -50% J&S A Joint & 50% survivor with pop-up

3 -50% J&S B Joint & 50% survivor with pop-up

6. Indicate whether the above form of payment settings also apply to GRS survivor and dependent child records ("Type" 5 through 9 in the 2012 Data) or whether a straight life annuity is valued for GRS survivor and dependent child records.

7. In the draft GRS June 30, 2012 valuation, the accrued annuity liability for member annuities and future refunds is $484,575,008. Based on the 2012 Data and the Data Layouts, the total accumulated contributions with interest is $460,360,048 ($434,070,444 for active members and $26,289,604 for inactive members). Please explain the $24 million difference.

8. Confirm that no retirees have elected the joint and 75% survivor annuity or the joint and 25% survivor annuity options.

9. The draft June 30, 2012 valuation reflected plan changes applicable to "certain active members". Please provide the list of agency codes indicating which plan change affected which agency, along with the effective dates of the changes for each agency that was provided by the System to Gabriel Roeder Smith & Company.

INFORMATION AND DOCUMENT REQUEST RELATED TO THE 1998 DEFINED CONTRIBUTION PLAN / ELECTION FOR RETROACTIVE COVERAGE IN THE EVENT OF IN-SERVICE DEATH

I. All available information and documentation related to the 1998 Defmed Contribution Plan under GRS (the "1998 DC Plan") and any elections for or processing of retroactive coverage under the 1998 DC Plan from FYE June 30,

--

=[

::1 I

2000 through FYE June 30, 2013 ("Death Benefit Period"), including, but not limited (0:

a. Documents, reports and analysis relating to posthumous coverage under the 1998 DC Plan approved during (he Death Benefit Period.

b. Documents, reports and analysis relating (0 the amount of death benefits paid from the 1998 DC Plan in each fiscal year during the Death Benefit Period.

c. The document(s) that authorized or approved posthumous coverage under the 1998 DC Plan during the Death Benefit Period.

d. Any relevant Board minutes documenting approval of posthumous coverage under the 1998 DC Plan during the Death Benefit Period.

* * * * *

Cit:oafIkl<Oi1 """"'" c.:n.:nl RftI=\ Systall ~~ Inte=:f CrNitinJ pI ... Eu ... Es.~ Alloottion

! ~~~oce.-Ra ... l .. _C ••• I1;i.;i-l [ _____________ -. ___ -~- _Ap,,~AlIocolloo.ofE1co.oIA...t.p ! I Gn"dTot:tk_lIl_Ct«Il<!ftJ;

F\oo:alY .. c

111m-inS

2jlonS-l9S6

3]19S6--1%7

~li9S7.lm

511988-19&9

6119&9>-1990

711990-1~1

i!1991_1991

911991_lm

IOr9SJ.-l'19'

11 1994-199S

121199'5-1996

13119%-lm

1'llm_l99&

]511998-1999

1611999-2000

17 2000-2001

,-"'" ...... ...... ~."

(0)

A .... ltySniq:lF""d .A .... ~~Flotod

"'~- ,-ToASF Ral<%

(0' 0' <0 .... ,_ .. ...... --.. No""-tr Pa=IGf

T""""" ~ T""""" --~% &nt..,.%

(0' '" ,.

'" -CR"S P_ Food ~t-&ni>9

ocF~FRn4R........ R......FoJ><! , ...... ,-f'<"""'lot Per=IGf T ... T"""" T'" T_'--, Eanbp% "' ... , Eo.",IaO%

(_}+{b>t{c}t(d) «}t(I)t{:s)->(hl

T_E1OOlIII

t:>b<AJIocotod.

T_' -, .... .. "",,,,~

ToedE-.-~%

>00'"

~

'''''' '''''' lOO%!

100%1

100"/01

100%!

100"/0'

'''''' 100%:

100%'

100"/0:

100%:

100"'"

'''''' -"""

An.IlyS~F.tod

,Ao:",utl

....~ . .,­~.%

.... ~. . ""'" ~.,

T_' ..... ,­ToASF

:1::: I I II I I I II I I II I II II I :=11 I 1 1 21 2OC4-100S 100%

22 2005-2006 100%

3 2005-1007 100%

2< 20::;'7_200& II)(l%

25 lOOS.2009 IIX1'Ai

26200'1.2010 100'10

n 20!().201] 100'10

28 20ll.1011 1M'

29 ]QU_lOll ]OO'A.

1

I I i ._, ! I

.J

-,

1

! I

-I

I I I

-I

I I I

I ,

. I j

I .1

EXHlBlT2

Annuity Savings Fund Balances Paid # of Members Out in FYE June 30, 2009

$1 to 10,000 $10 001 to 20,000 $20,001 to 30 000 $30,001 to 40,000 $40001 to 50,000 $50,001 to 60,000 $60 001 to 70 000 $70,001 to 80,000 $80,001 to 90 000

$90,001 to 100,000 $100,001 to 200,000 $200,00 1 to 300,000 $300,001 to 400,000 $400,001 to 500,000

$500,001 to 1,000,000 Greater than $1,000,000

EXHIBIT 2

Annuity Savings Fund Balances Paid # of Members Out in FYE June 30, 2010

$1 to 10,000 10001 to 20,OO( ~?O 001 to 30,OO( S30,001 to 4G I,OO( MOM1t05C 1,000

I to 6(] 1,000 ~"Il 00 1 to 70.000

I to 80,000 S80,OO] to 90,000

I to 100,000 lnt IlQ I to ,?Illl Mil

)J to

~ ,00 I to MIll 11M 001 to

l:<;llfl,OOI to ],0011111111 ( , ~1 n

I -I

I I

Annuity Savings Fund Balances Paid Out in FYE June 30. 2011

$1 to 10,000 ~10Ml to?OOOO

:10001 to ~oooo ~~O 001 to dO 000

S40,00l to ~oooo ~~O no\ to 60,000

to 70,000 ~70 001 to 80,000

I to 90,000 'l:QO 001 to 100,000 100001 to. ~?oo 001 to.\nn 000

)! to· Mon /lI)! to ~no non

I to I, G ,'1:1000000

EXHIBIT 2

# of

EXDlBIT2

Annuity Savings Fund Balances Paid # of Members Out in FYE June 30, 2012

$1 to 10,000 $10,001 to 20,000 $20,()O1 to 30,000 $30,001 to 40,000 ~o 001. to 50,000 $50,001 to 60,000 ~,;n om to 70,000 S70,001 to 80,000 GRO.OOI to 90,000 ,QO 001. to 100,000 10 ),001 to ?OO oon

1001. to :~" ,Ml to .ino nno :.loon .to

.to non onn

rt han $I

J'------ ---------------------_._._-_ .. _ .. __ .... _ ... _ .. -

I i I

EXHIBIT 2

Annuity Savblgs Fund Qalanc:es Paid # of Members Out ill FYE June 30. 2013

$1 to 10,000 $10,001 to 20,000 $20,001 to 30,000 $30,001 to 40,000 $40,001 to 50,000 $50,001 to 60,000 $60,001 to 70,000 $70,001 to 80,000 $80001 to 90,000 J $90,001 to 100,000

$100,001 to 200,000 $200,001 to 300,000 $300,001 to 400,000 $400,001 to 500,000

$500,001 to 1,000000 Greater than $1,000,000

,J

J

i '1

I I I ! [ i

. i "i

I I i 1

·1 I I

I , i ! , ,

I I

I ! I

'1

I I i I I

I ,

i

City of Detroit General Retirement System (nGRSn) Actual Fund Returns (%)

Fiscal Year

1 1984-1985 2

3 4

5 6 7 8

9

10

1985:1986 1986-1987 1987-1988 1988-1989 1989-1990 1990-1991 1991-1992 1992-1993 1993:1994

1 1994-1995 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

1995-1996 1990-1997 1997-1998 1998-1999 1999.-2000 2000-2001 2001-2002 2002:2003 2003~2004

2004-2005 2005:2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

EXHmIT3

Historical Fund Performance

Investment Returns

ActualGRS Market Rate

01 Rerom (P.rcent %)

1 ___ . __ .• _______ . _________ .. __ •. ________ · __ ·• ______ · __ ------............ -.- •.• ~---.-- .. -.-.----.,,--.. -,.~- .. ----------•• ----•. -_ .. -------.-.

I I

APPENDIXD

Supplemental Information and Document Request Relating to the City. of Detroit Police and Fire Retirement System ("PFRS" or "the System")

RE: (1) Defined Contribution Annuity Fund and 13th Checks; (2) General Information Relating to System Operation Based Upon Most Recent Valuation Report and Data Previously Provided to the Emergency Manager

INFORMATION AND DOCUMENT REQUEST LIST REQUEST RE: DEFINED CONTRIBUTION ANNUITY FUND AND 13TH CHECKS

1, Completion of the attached chart (Exhibit IlMember Contributions, Interest Crediting and Gain Sharing),

2, Dociunents, reports and analysis summarizing the "percent of pay" withheld from PFRS employee checks and credited to their Defined Contribution Annuity Fund ("DCAF") accounts from fiscal year ending ("FYE") June 30, 1985 through FYE June 30, 2013 ("Request Period"). In addition, provide annual total employee contributions credited to DCAF.

3, Documents, reports and analysis relating to any "gain sharing" arrangements impacting active employees or retirees either through the payment of additional pension payments made to retirees (commonly known as the "13th Check") or interest credited to active employees' DCAF accounts.

4, Coinpletion of the attached chart (Exhibit 2/Actual Fund Returns (%» which requests information relating to the actual market rate of return on PFRS assets for each fiscal year during the Request Period,

5. Documents, reports and analysis relating to amounts distributed to members (including direct and indirect transfers or rollover;' to the City of Detroit Eligible Deferred Compensation Plan, another retirement plan or IRA) from their individual accounts in DCAF during the Request Period,

GENERAL INFORMATION RELATING TO SYSTEM OPERATION BASED UPON 2012 FINAL VALUATION REPORT AND DATA PREVIOUSLY PROVIDED TO THE EMERGENCY MANAGER2

2 The requests relating to data are in reference to the Excel document entitled "2012 Detroit Data Layouts" (the "Data Layouts") and the 2012 individual participant data provided ("2012 Data") that were provided to the Emergency Manager in response to the Document Request Pursuant to P,A. 436, dated April 25, 2013.

.J

I

I

I

1. Confinn that all participants in pay statns receive a COLA. lfnot, describe how participants in pay statns that do not receive a COLA are identified in the 2012 Data.

2. Confinn that the "Paid Annuity" (as such tenn is used in the Data Layouts) amount does not receive a COLA. Also confinn that the "Current Pension" (as such tenn is used in the Data Layouts) amount is separate from the "Paid Annuity" amount.

3. Confinn that the "Paid Annuity" has the same fonn of payment as the "Current Pension". lfnot, confirm that it is always paid as a straight life annuity.

4. Confmn whether disability retirees receive the applicable COLA from the date of disability or from the date of conversion to a retirement benefit.

5. Participants in pay statns were reported in the 2012 Data with an "Option" code and a separate "Popup Code". The following combinations were used in the 2012 Data. Please review the fonn of payment to be valued and indicate what, if any, corrections are necessary.

Option code Popup Code Fonn of Payment To Be Valued

o - Straight Life blank Straight life

o - Straight Life 0 Straight life

o - Straight Life A Straight life

o - Straight Life B Straight life

o - Straight Life C Straight life

1 - Straight Life blank Straight life

I - Straight Life 0 Straight life

1 - Straight Life A Straight life

I - Straight Life B Straight life

I - Straight Life C Straight life

2-100%J&S blank Joint & 100% survivor without pop-up

2-100%J&S 0 Joint & 100% survivor without pop-up

--1-------------------------------

l I

2-100%J&S A Joint & 100% survivor with pop-up

2-100%J&S B Joint & 100% survivor with pop-up

2-100%J&S C Joint & 100% survivor with pop-up

3 -50% J&S blank Joint & 50% survivor without pop-up

3 -50%J&S 0 Joint & 50% survivor without pop-up

3 -50%J&S A Joint & 50% survivor with pop-up

3 -50%J&S B Joint & 50% survivor with pop-up

3 -50%J&S C Joint & 50% survivor with pop-up

6. Confirm the number of pop-up options provided under PFRS, and provide an explanation of the differences between these pop-up options and how they are valued for valuation purposes.

7. Confirm whether the above form of payment settings also apply to PFRS survivor and dependent child records ("Type" 5 through 9 in the 2012 Data) or whether a straight life annuity is valued for PFRS survivor and dependent child records.

8. Confirm that no PFRS retirees have elected the joint and 75% survivor annuity option.

9. Indicate which participants in pay status in the 1969 Plan receive the simple 2.25% COLA instead of the compound 2.25% COLA. Explain how they are identified in the 2012 Data.

10. We understand that 75% of the retirement benefits (including any COLAs) are paid to an individual account for each DROP member during the DROP period. Confirm that the accumulated benefits in the individual accounts as of the valuation date are separate from the System assets and are not included in the System's valuation in either the assets or liabilities. If they are included in the System's valuation, provide the DROP account balances as of June 30, 2012 for the DROP members, by individual.

* * * * *

_.!...._ ..

_._.---_!.._--_.

I""

'""-.'-<" '---'--

•

City .rIlotroH Police & Fin Retlremtal System Mea"', CoutrlImIoIIS,I ... rest CncIiIIIIg aDd Gain SllariDg

DdIaed ContriInrtloD Au!ltt Fad Accontr

FiKalYur 1 1984-1985

! 1985-1986 I 1986-1987 , 1987R l988

5 1988-1989 5 1989-1990 1 1990-1991

I 1991-1992 1 1992-1993 [) 1993-1994-

1 1994-1995 :'. 1995-1996 11996-1m , 1991-1998

5 1998-1999

6 1999-2000

72000-2001

82001-2002

92002-2003 ~ 200~2004

" 2()()4.2005 ~ 2005-2006

!3 2006-2007

!4 2007-2008

'" 2008-2009 !6 2009-2010 l7 201(}"'2011

!3 2011-20l2 !9 2012-2013

1

20

2

22

2

24

25 26 2 28

2'

Mallelatory Withkoldlao %PerUst

olPay

(a)

Active Emplofees

Repbr Interert Cftdjtiq;

%lBttrest 5"' ....... Cmlited C_

ToAcco.llt To Acatllat

(b) (e)

Re_

Galn Gala Sham 0/13 ......... SlDkiat

N_ Credit<d 01 T .....

To AtcouDt ~ noBuS

"-""-"-.;-~--'---;I"-'

LI

EXHIBIT I

(a)+(hMo)

Gnad Tolok

IDt.&:Gabn

Tobl DoIIorS

!

..J I

-7,-------------.---------- --.-.-------........... -

J I I

I I !

I I

I I

I

City of Detroit Police & Fire Retirement System ("PFRS") Actual Fund Returns (%)

Historical Fund Performance

Fiscal Year

I 1984-1985 2 1985-1986 3 1986-1987 4 1987-1988 5 1988·1989 6 1989-1990 7 1990-1991 8 1991-1992

1992-1993 1993-1994

1 1994-1995

9 10 I 12 13 14 IS 16 17 18 19 20 2

22 23 24 25 26 27 28 29

1995-1996 1996-1997 1997-1998 1998-1999 1999·2000 2000-2001 2001-2002 2002-2003 2003-2004

I 2004-2005 2005·2006 2006-2007 2007-2008 2008-2009 2009·2010 2010-2011 2011-2012 2012-2013

Investment Returns

ActualPFRS Market Rate

of Return (percent %j

EXHIBIT 2