CAFRMAN'S REVIEW GUIDE | |||
Ret1 - Surplus Retirement Distribution Form (Optional) |
This form is optional in that it is not necessary to complete; however, the retirement/pension fund surpluses can be huge and will materially add to the overall total potential surpluses and per capita refund potential.
This is the distribution form if surpluses are identified in the government that manages the retirement system AND if there are more than one retirement system involved. Usually, this is at the State-level retirement system although this form can be used if there is more than one retirement system managed by a city, county, and/or other government-type entity.
Only Retirement Surpluses are Considered
Retirement/pension plans are handled differently than other funds. Retirement/Pension plans need a certain amount in order to fulfill their mission and obligations to the government employees who pay into the system. Retirement/pension funds should be fully funded based on an actuary evaluation to insure that sufficient funds are available to meet the obligations to beneficiaries. Actuarial reports are usually prepared on most of the plans in order to determine what is needed to meet the requirements for the next fiscal year.
This analysis may involve requesting financial data from one or more retirement/ pension plans. Usually the government will state that detailed financial and actuarial data are not contained in the CAFR and must be obtained from the plan(s) itself. However, sometimes the CAFR contains enough data that obtaining the plan's detailed financial data is not necessary.
The potential surpluses may be a little difficult to recognize because of the way the data is presented.
Actuarial Value of Assets - This is the amount the actuary determines is the value of assets within each plan. They are required to use the fair value of assets rather than other evaluation techniques.
Actuarial Accrued Liability - This is the amount that the actuary determines is needed to fulfill the requirements to all beneficiaries enrolled in the plan, usually referred to as full funded amount.
What you will probably see is an "Unfunded" amount with a negative amount. This means the plan is over funded, i.e. has excesses or potential surpluses. Sometimes, it says "excess", but this data must be looked at carefully before a determination is made that potential surpluses exist.
Here are column headings from two CAFRs that show excess/potential surpluses:
Unfunded Amount - The amount needed for the plan to be fully funded.
(In Thousands) | |||
Actuarial Value of Plan Assets | Actuarial Accrued Liability | Funding Liability (Excess) | |
Plan 1 | $100,557 | $ 82,518 | ($18,039) |
Actuarial Value of Assets | Actuarial Liability Entry Age | Unfunded | |
Plan 2 | $353,056 | $348,966 | ($4,090) |
The $18,039,000 and $4,090,000 are surpluses. For potential surpluses the "Funded Ratio" is usually greater than 100%.
Distribution Between Employee and Government
Both the employee and the government contribute to most retirement/pension funds. So any surplus needs to be distributed between the employee portion and government portion.
The percent contributions between employee and employer can usually be found in the CAFR, the retirement plan's financial statements (usually a separate CAFR) and/or the actuarial analysis. We use the most current contributions as the basis for the division; however, in an audit/detailed review, the actual contributions for each current and retired employee and the actual government contributions would be computed.
Surplus Amounts for Employees and Government.
The next step is to determine the amount of the surplus that should apply to the employees contributions and what amount should be allocated to the government (taxpayers).
This is computed automatically by the program based on the percentages entered above.
Use the Government Portion of Surpluses
The government portion is used in the Rev1 or Rev2 Form for the taxpayers portion of these surpluses.
The per employee surpluses for the government portion of the surpluses provides a figure that can be used in the alternative method of computing the taxpyers' portion in the Rev2 Form. The total number of retired and currently employed employees for each retirement fund is necessary for this computation. This data may be available in the CAFR, but most likely you will have to get the data from each retirement system.
This is not necessary the amount each employee would receive because in most State plans there are a number of what are referred to as employers (cities, counties, sometimes separate organizations within a city or county). For example in one State the Municipal Retirement System has over 700 cities as employers. Some will have potential surpluses that exceed the average and some are unfunded and have no potential surpluses, but the average per capita for the entire State is substantial.
DE = Data Entry. The cells with this designation are cells that a user should enter the appropriate data.
An "-A" at the end of a cell designation means that in the computer program this cell is completed by the computer program and user data entry is not necessary. For example, C9-A means that in Column "C" and Row "9" the entry in that cell (C9) is automatically entered by the program.
Here is what the Ret1 Form looks like:
For all users, the following table lists the entries/formulas in the appropriate cells on the form corresponding to the picture of the form above.
RET1 - SURPLUS RETIREMENT DISTRIBUTION FORM | |||
DE-1 | Type of Government | ||
DE-2 | File Page Number | ||
DE-3 | Name of Government or Organization | ||
DE-4 | Abbreviated Organization Name | ||
C1 | - | C8 | Name of Retirement Plan |
D1 | - | D8 | Total Surpluses identified for each plan |
E1 | - | E8 | The employee percent contribution to their retirement |
F1 | - | F8 | The governments percent contribution to the retirement plan |
C9-A | - | C16-A | Copies the Name of the Retirement Plan [C1-C8] |
D9-A | The employees' portion of the surpluses - [E1/(E1+F1) x D1] | ||
D10-A | The employees' portion of the surpluses - [E2/(E2+F2) x D2] | ||
D11-A | The employees' portion of the surpluses - [E3/(E3+F3) x D3] | ||
D12-A | The employees' portion of the surpluses - [E4/(E4+F4) x D4] | ||
D13-A | The employees' portion of the surpluses - [E5/(E5+F5) x D5] | ||
D14-A | The employees' portion of the surpluses - [E6/(E6+F6) x D6] | ||
D15-A | The employees' portion of the surpluses - [E7/(E7+F7) x D7] | ||
D16-A | The employees' portion of the surpluses - [E8/(E8+F8) x D8] | ||
E9-A | The governments portion of the surpluses - [F1/E1+F1) x D1] | ||
E10-A | The governments portion of the surpluses - [F2/E2+F2) x D2] | ||
E11-A | The governments portion of the surpluses - [F3/E3+F3) x D3] | ||
E12-A | The governments portion of the surpluses - [F4/E4+F4) x D4] | ||
E13-A | The governments portion of the surpluses - [F5/E5+F5) x D5] | ||
E14-A | The governments portion of the surpluses - [F6/E6+F6) x D6] | ||
E15-A | The governments portion of the surpluses - [F7/E7+F7) x D7] | ||
E16-A | The governments portion of the surpluses - [F8/E8+F8) x D8] | ||
C17-A | - | C24-A | Copies the Name of the Retirement Plan [C1-C8] |
D17 | - | D24 | Number of employes, current and retired for each plan |
E17-A | Employee portion of surpluses per employee - [D9/D17] | ||
E18-A | Employee portion of surpluses per employee - [D10/D18] | ||
E19-A | Employee portion of surpluses per employee - [D11/D19] | ||
E20-A | Employee portion of surpluses per employee - [D12/D20] | ||
E21-A | Employee portion of surpluses per employee - [D13/D21] | ||
E22-A | Employee portion of surpluses per employee - [D14/D22] | ||
E23-A | Employee portion of surpluses per employee - [D15/D23] | ||
E24-A | Employee portion of surpluses per employee - [D16/D24] | ||
F17-A | Employee portion of surpluses per employee - [E9/D17] | ||
F18-A | Employee portion of surpluses per employee - [E10/D18] | ||
F19-A | Employee portion of surpluses per employee - [E11/D19] | ||
F20-A | Employee portion of surpluses per employee - [E12/D20] | ||
F21-A | Employee portion of surpluses per employee - [E13/D21] | ||
F22-A | Employee portion of surpluses per employee - [E14/D22] | ||
F23-A | Employee portion of surpluses per employee - [E15/D23] | ||
F24-A | Employee portion of surpluses per employee - [E16/D24] |