APPENDIX I – DETAIL FOR ACTUARIAL CERTIFICATION

2 

TABULAR: 

Valuation Assumption: 12.95% for the plan year ending Feb 2017; 6.75% per year thereafter. Note, the 12.95% return takes 

into account the Investment Consultant’s estimated return of 12.34% over the first 11 months and we 

assumed the Fund would earn 0.55% (based on the 6.75% annual assumption) for the final month. 

(i) (ii) (iii) (iv) (v) (vi) (vii)

Assumed Benefit Payments

Period Annual Beginning Withdrawal Future New Terminated Administrative Investment Ending

Beginning Return MVA Contributions Liability Payments Active Entrants Retiree Vested Beneficiary Expenses Earnings MVA

1/1/2017 12.95% $51,322,661 $632,519 $67,907 $46,083 $0 $2,057,494 $113,382 $157,734 $235,267 $830,176 $50,243,303

3/1/2017 6.75% $50,243,303 3,603,460 201,274 629,288 0 11,888,097 1,047,594 903,721 1,426,994 2,990,016 41,142,359

3/1/2018 6.75% $41,142,359 3,421,485 200,742 937,499 0 11,423,584 1,390,954 861,239 1,443,143 2,364,308 31,072,474

3/1/2019 6.75% $31,072,474 3,248,700 65,506 1,205,735 0 10,959,643 1,717,928 819,142 1,460,031 1,670,843 19,895,044

3/1/2020 6.75% $19,895,044 3,084,641 64,158 1,473,080 0 10,502,140 2,050,095 777,603 1,477,653 906,955 7,670,226

3/1/2021 6.75% $7,670,226 2,928,866 64,158 1,613,067 0 9,607,180 2,275,961 724,692 1,496,003 95,321 0

Stress Testing Scenario: 12.53% for the plan year ending Feb 2017; 3.00% for the plan year ending Feb 2018, increasing by 

1% per year for the next three years, followed by 6.75% thereafter. Note, the 12.53% return takes into 

account the Investment Consultant’s estimated a return of 12.34% over the first 11 months and we 

assumed the Fund would earn 0.17% (based on a 2.00% annual assumption) for the final month. 

(i) (ii) (iii) (iv) (v) (vi) (vii)

Assumed Benefit Payments

Period Annual Beginning Withdrawal Future New Terminated Administrative Investment Ending

Beginning Return MVA Contributions Liability Payments Active Entrants Retiree Vested Beneficiary Expenses Earnings MVA

1/1/2017 12.53% $51,322,661 $632,519 $67,907 $46,083 $0 $2,057,494 $113,382 $157,734 $235,267 $620,730 $50,033,857

3/1/2017 3.00% $50,033,857 3,603,460 201,274 629,288 0 11,888,097 1,047,594 903,721 1,426,994 1,320,992 39,263,889

3/1/2018 4.00% $39,263,889 3,421,485 200,742 937,499 0 11,423,584 1,390,954 861,239 1,443,143 1,324,310 28,154,006

3/1/2019 5.00% $28,154,006 3,248,700 65,506 1,205,735 0 10,959,643 1,717,928 819,142 1,460,031 1,090,411 16,396,145

3/1/2020 6.00% $16,396,145 3,084,641 64,158 1,473,080 0 10,502,140 2,050,095 777,603 1,477,653 595,554 3,859,926

3/1/2021 6.75% $3,859,926 2,928,866 64,158 1,522,479 0 9,303,978 2,222,526 716,379 1,496,003 -146,751 0
APPENDIX II – METHODOLOGY AND ASSUMPTIONS

3 

A. Actuarial Assumptions

1. Investment Return (net of investment expenses)

Discount Rate: 6.75% per year 

Valuation Assumption: 12.95%* for the plan year ending Feb 2017; 6.75% per year

thereafter

Stress Testing Scenario: 12.53%* for the plan year ending Feb 2017; 3.00% for the 

plan year ending Feb 2018, increasing by 1% per year for 

the next three years, followed by 6.75% thereafter 

* The Investment Consultant provided the estimated Market Value of Assets in the 

portfolio as of December 31, 2016; the amount was adjusted to account for cash and 

receivables. In addition, they estimated a return of 12.34% over the first 11 months of 

the fiscal year. For the stress testing scenario, we assumed the Fund would earn 0.17% 

(based on a 2.00% assumption) for the final month for an annual return of 12.53%. 

Similarly, for the scenario where the Fund earns 6.75% in all years, we assumed the Fund 

would earn 0.55% (based on the 6.75% assumption) for the final month for an annual 

return of 12.95%. 

2. Administrative Expenses

The administrative expense assumption includes: 

• INFLATION: Based on historical experience, we assume most administrative 

expenses would increase by our inflation assumption of 1.5% per year (including 

PBGC premiums). The only exception is the medical and retirement benefits for the 

Fund Office employees, which we assume, would increase 4% per year (but limited 

to 100% of payroll). Finally, expenses are limited to 20% of expected benefit 

payments in all scenarios because at that point (which is 30 or more years out) it 

would not make sense to allow expenses to grow any further relative to benefit 

payments, and consideration could be given to annuitization. 

• PARTITION: We assume administrative fees for fiduciary insurance and certain 

professional fees will be reduced if the partition is approved. This equates to an 

approximately 15% reduction in expenses (not including PBGC premiums) in 2018 

with 1.6% annual increases thereafter. Expenses are allocated between the Original 

Plan and Successor Plan based on projected headcounts with PBGC premiums paid 

by the Original Plan for the 10-year period following the partition effective date. 

After this 10-year period, we are assuming the premium would be paid 50% by both 

the Original Plan and Successor Plan. 

• INSOLVENCY: For scenarios where the Fund is projected to become insolvent, we 

are assuming that in the Plan Year following insolvency there would be a decrease in 

fiduciary insurance, that Trustee meetings would be limited to one per year (currently 

four), and professional fees would be reduced. This equates to an approximately 30% 

reduction in expenses (not including PBGC premiums) in 2022 and then 1.6% annual 

increases thereafter.



APPENDIX II – METHODOLOGY AND ASSUMPTIONS

7 

13. Changes in Assumptions Since Last Valuation

• Mortality: the prior assumption for Healthy lives was the RP2000 with blue collar 

adjustment projected five-years with scale AA. For Disabled lives the prior 

assumption used the same table with ages set-forward five years.

• Rate of Turnover: the rates remain unchanged, but we previously assumed active 

participants who terminate would retire at age 65. 

• Rates of Retirement: we previously assumed terminated vested participants 

would retire at age 65

• Marriage Assumption: we previously assumed 80% married

• Normal Form: we previously assumed all active and terminated vested 

participants elect a Single Life Annuity 

B. Actuarial Funding Method

The cost method for determining liabilities for this valuation is the Unit Credit Cost method. 

This is one of a family of valuation methods known as accrued benefit methods. The chief 

characteristic of accrued benefit methods is that the funding pattern follows the pattern of 

benefit accrual. The normal cost is determined as that portion of each participant’s benefit 

attributable to service expected to be earned in the upcoming plan year. The Actuarial 

Liability, which is determined for each participant as of each valuation date, represents the 

actuarial present value of the portion of each participant’s benefit attributable to service 

earned prior to the valuation date.