HomeMy WebLinkAboutIR 078 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 22-078
To the Mayor and Members of the City Council June 7, 2022
Page 1 of 1
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SUBJECT: FORT WORTH EMPLOYEES' RETIREMENT FUND INVESTMENT
VA PROGRAM EXPENSE INFORMATION
During the May 24, 2022,joint meeting between the Fort Worth Employees' Retirement Fund Board
of Trustees and the City of Fort Worth City Council, District 7 Councilmember Leonard Firestone
requested further discussion regarding the investment expenses of the Fort Worth Employees'
Retirement Fund ("Retirement Fund").
In response to Councilmember Firestone's request, please find attached a memo from Retirement
Fund Chief Investment Officer, Derek Dagnan, that provides some additional information and
context to the Retirement Fund's investment program expenses.
Additionally, please find attached a copy of the Retirement Fund's Annual Comprehensive Financial
Report for the fiscal years ending September 30, 2020 and 2021 .
If you have any questions or if you require any additional information, please contact Derrick
Dagnan, at (817) 632-8919 or by email at Derrick.Dagnan(5-fwretirement.org.
You may also contact Interim Assistant City Manager and Chief Financial Officer, Reginald Zeno,
at (817) 392-8500, or by email at Reginald.Zeno(a)fortworthtexas.gov.
David Cooke
City Manager
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
eFORT WORTH EMPLOYEES'
� RETIREMENT FUND
TO: David Cooke, City Manager
Reginald Zeno, CFO and Interim Assistant City Manager
CC: Fort Worth Employees' Retirement Fund Trustees
FROM: Derrick Dagnan, CIO
DATE: May 27, 2022
RE: Response to Inquiry- Investment Program Expenses
During the May 24, 2022,Joint Meeting with the Fort Worth Employees' Retirement Fund Board
of Trustees and the City of Fort Worth City Council, District 7 Councilmember Leonard Firestone
requested further discussion regarding the investment expenses of the Fund. This memo
provides additional information and context. As always, staff welcomes the opportunity to
provide further information or discussion about the Fund.
The link below provides access to the Annual Financial Reports for the Fund for the last several
years.
https://fortworthretirementtx-investments.documents-on-
demand.com/?1=f936075f2541e5119795001fbc00ed84
The annual report for the fiscal year end September 30, 2021, includes expense information on
pages 50, 51, 53, 64, and 65. With respect to investment program expenses, the staff and Board
utilizes three main categories to evaluate expenses: 1) administrative expenses, 2) investment
fees paid from the Trust, and 3) investment fees netted against returns.
At fiscal year end, the Fund produced an investment return of 22.4% and had a market value of
approximately $2.8 billion. The table below from page 50 of the annual report provides details
for the Total Administrative Expenses. This figure includes investment expenses related to
salaries and benefits, legal, diligence, monitoring, technology, consultants, and other vendors.
For 2021, the Fund's operating costs totaled just under $6.0 million, which represents 0.21% of
the market value of the Fund. For comparison purposes, the Total Administrative Expenses in
fiscal year 2020 represented 0.22% of the ending market value of the Fund.
1
Schedule of Administrative Expenses
Years Ended September 30,2021 and 2020
2021 2020
Administrative Office
Staff and Benefits $ 2,442,855 $ 1,763,596
Contributions to Retirement Fund 490,449 355,759
Due Diligence - 2,725
Medical Reviews 16,423 5,065
Insurance 152,394 148,634
Office Expense 108,502 128,925
Building Expenses 243,096 237,770
Conferences and Training 10,534 16,803
Pension Administration Hosting 284,248 173,176
Pension Administration Programming 386,056 367,692
Equipment and Supplies 100,189 56,622
Total Administrative Office 4,234,746 3,256,767
Professional Services
Actuarial Services 103,934 132,286
Accounting and Auditing 56,900 55,300
Consulting 1,335,271 1,387,731
Legal Services 174,100 178,717
Other Consulting 94,688 204,590
Total Professional Services 1,764,893 1,958,624
Total Administrative Expenses $ 5,999,639 $ 5,215,391
The table below from page 64 of the annual report provides details on the investment fees paid
by the Fund and the investment fees netted against returns. The table fulfills compliance with
specified fee reporting requirements of the Texas State Pension Review Board (PRB), which is
collected and monitored for all public pensions in Texas. This table is broken down by asset class
and the type of fee. For 2021, the Total Direct and Indirect Fees were $40.6 million, or 1.44% of
the year end market value. This includes approximately $5.9 million in fees paid from the Fund
and $34.8 million in fees netted against returns. For comparison purposes, the Total Direct and
Indirect Fees represented 0.95% of the ending market value in fiscal year 2020.
2
Investment Manager Fees
For the Fiscal Year Ended September 30, 2021
Fees Paid from the
Pension Trust Fund Fees Netted Against Returns
Fair Value Assets Performance Total Fees
Under Management Performance Management Fees/Carried Direct and
Asset Class Management Fees Fees Brokers Fees Fees Interest Indirect
Fixed Income $ 540,575,694 $ 1,539,028 $ 207,031 $ 260 $ 327,700 $ $ 2,074,019
Public Equity 1,210,793,304 2,901,672 - 201,069 253,661 3,356,402
Real Assets 82,880,794 1,157,085 13,495 2,831,648 6,403,077 10,405,305
Alternative Assets* 940,778,466 47,867 - 319 6,998,395 17,737,257 24,783,838
Cash Equlvelents 48,904,287
Totals $ 2,823,932,545 $ 5,645,652 $ 207,031 $ 215,143 $ 10,411,404 $ 24,140,334 $40,619,564
Total Investment Expenses
Total Direct and Indirect Fees 40,619,564
Reconciling Items to Statement of Net Position Investment Services
Accrued Income $ (5,699,733) Custodial 536,881
Broker Receivables (155,072,129) Research -
Broker Payables 177,845,110 Investment Consulting 1,335,271
Securities Lending Collateral 174,422,862 Legal 77,305
Total Investments Total Investment
Statement of Net Position $ 3,015,428,655 Expenses 42,569,021
It is important to note that approximately$25.0 million of the Total Direct and Indirect Fees relate
to profit sharing or performance fees that accrue to managers that produce returns that exceed
preset performance targets. The performance fees are volatile depending on the trailing
performance, investment terms, and timing of transactions for each investment manager. For
example, performance fees totaled $6.6 million in fiscal year 2020. Staff evaluates investment
fees excluding this profit sharing, and for 2021 this would total approximately $15.6 million, or
0.55% of the ending market value. In comparison, Total Investment Expense less performance
fees represented 0.67% of the ending market value in fiscal year 2020.
In addition, it is important to note that the Total Investment Expenses line in the table above
includes items that are also included in the professional services fees of the Schedule of
Administrative Expenses. Evaluating this line and the Schedule of Administrative Expenses would
double count certain expenses.
3
Fort WorthRetirement Fund
Annual Comprehensive
Re
Financial ort
For fiscal years ending September 30, 2020 and 2021
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A pension trust d of.the City of Fort Worth, Texas
( FORT WORTH EMPLOYEES'
rRRETIREMENT FUND
Annual Comprehensive Financial Report
A Pension Trust Fund of the City of Fort Worth, Texas
For Fiscal Years Ended September 30, 2021 and 2020
Benita Falls Harper
Executive Director
Fort Worth Employees' Retirement Fund
3801 Hulen Street, Suite 101, Fort Worth, Texas, 76107
www.fwretirement.org
817-632-8900
Prepared by the Staff of the Fort Worth Employees' Retirement Fund
ON THE COVER: Trinity Park has great trails for
walkers, runners, and cyclists to enjoy...and explore.
2021 At-A-Glance
Investment Rate of Return Fund Net Position
2144% $2 .84 Billion
Contributions (+) Distributions (-)
N $200 N $300
zo $180 zo
$160 . . $25o Refunds: $5.2
$140
$120 $200
$100
$80 $150
$60 $128.5 '
$40 $100
$20
$- — $50
In Millions
From Employer ■From Members $
In Millions
Membership
Table of Contents
INTRODUCTORY SECTION
Letterof Transmittal................................................................................................................................................................i
Certificateof Achievement....................................................................................................................................................v
Awardfor Administration...................................................................................................................................................vi
Boardof Trustees..................................................................................................................................................................vii
AdministrativeOrganization...........................................................................................................................................viii
Professional Service Providers.......................................................................................................................................viii
City Plan: Summary of Key Provisions...........................................................................................................................ix
Staff Plan: Summary of Key Provisions .......................................................................................................................xiii
FINANCIAL SECTION
IndependentAuditor's Report........................................................................................................................................... 1
Management's Discussion and Analysis (Unaudited)..............................................................................................4
Combined Statements of Fiduciary Net Position........................................................................................................9
Combined Statements of Changes in Fiduciary Net Position..............................................................................10
Notes to Combined Financial Statements....................................................................................................................11
REQUIRED SUPPLEMENTARY INFORMATION...........................................................................39
Schedule of Changes in Net Pension Liability- City(Unaudited).....................................................................40
Schedule of Changes in Net Pension Liability- Staff(Unaudited)....................................................................42
Schedule of Net Pension Liability (Unaudited).........................................................................................................44
Schedule of Actuarially Determined Employer Contributions (Unaudited).................................................45
Schedule of Combined Money-Weighted Investment Returns (Unaudited).................................................46
Notes to Required Supplementary Information.......................................................................................................47
OTHER SUPPLEMENTARY INFORMATION..................................................................................49
Schedule of Administrative Expenses...........................................................................................................................50
Schedule of Investment Management Fees.................................................................................................................51
Schedule of Professional Services...................................................................................................................................53
INVESTMENT SECTION
Market Overview of Fiscal Year.......................................................................................................................................55
InvestmentSummary...........................................................................................................................................................57
Schedule of Asset Allocations and Returns.................................................................................................................58
InvestmentManagers..........................................................................................................................................................59
Investment Policies Statement Summary....................................................................................................................60
Schedule of Top Ten Investments...................................................................................................................................63
Schedule of Investment Management,Performance,and Brokers'Fees by Asset Class..........................64
Scheduleof Brokers'Fees..................................................................................................................................................65
ACTUARIAL SECTION
Actuary's Certification Letter ..........................................................................................................................................67
ExecutiveSummary..............................................................................................................................................................72
Actuarial Assumptions and Methods: City Plan........................................................................................................73
Actuarial Assumptions and Methods: Staff Plan.......................................................................................................79
Scheduleof Funding Progress..........................................................................................................................................84
Development of Actuarial Value of Assets: City Plan..............................................................................................85
Development of Actuarial Value of Assets: Staff Plan.............................................................................................86
ActuarialGain or Loss..........................................................................................................................................................87
Analysis of Normal Cost by Component.......................................................................................................................88
Retirees, Beneficiaries, and Disabled Participants Added to and Removed from Rolls...........................89
SolvencyTest...........................................................................................................................................................................90
Distribution of Active Members by Age and Years of Service - City Plan......................................................91
Historical Active Participant Data..................................................................................................................................92
STATISTICAL SECTION
Statistical Information Overview....................................................................................................................................94
Schedule of Changes in Plan Net Position: City Plan...............................................................................................95
Schedule of Changes in Plan Net Position: Staff Plan..............................................................................................96
Schedule of Revenue by Source.......................................................................................................................................97
MembershipPopulation.....................................................................................................................................................98
Distribution of Active Participants by Age..................................................................................................................99
Distribution of Active Participants by Service...........................................................................................................99
Distribution of Retired Members by Type of Benefits........................................................................................100
Schedule of Average Benefit Payments by Years of Service and Final Average Salary: City...............101
Schedule of Average Benefit Payments by Years of Service and Final Average Salary: Staff.............103
Scheduleof Benefits by Type.........................................................................................................................................104
Schedule of Average Benefit Payment Amounts....................................................................................................105
Independent Auditor's Report On Internal Control Over Financial Reporting and on Compliance and
Other Matters Based on Audit of Financial Statements Performed in Accordance with
Governmental Auditing Standards..............................................................................................................106
INTRODUCTORY SECTION
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"Our paths are not
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Author Priya Andis
FUND_At' FORT WORTH EMPLOYEES'
RETIREMENT
Letter of Transmittal
March 7,2022
Board of Trustees
Fort Worth Employees'Retirement Fund
3801 Hulen Street,Suite 101
Fort Worth,Texas 76107
Dear Board Members and Plan Participants:
It is my pleasure to submit to you the Annual Comprehensive Financial Report (Annual Report) of the Fort
Worth Employees' Retirement Fund(the Fund) for the fiscal years ended September 30,2021 and 2020.Our
mission is to provide retirement benefits and exceptional services while sustaining our members' trust.
Responsibility for both the accuracy of the data and the completeness and fairness of its presentation rests with
me and the staff of the Fund.To the best of my knowledge and belief,the enclosed data is accurate in all material
respects and is reported in a manner designed to present fairly the financial position and results of operations
of the Fund.I trust that you and the members of the Fund will find the Annual Report helpful in understanding
your retirement plan.
Accounting and Internal Controls
The financial statements have been prepared in accordance with Generally Accepted Accounting Principles
(GAAP) as prescribed by the Governmental Accounting Standards Board (GASB) rules. The accompanying
financial statements are prepared using the accrual basis of accounting.Member and employer contributions
are recognized when due,pursuant to formal commitments as well as statutory or contractual requirements.
Expenses are recorded when the corresponding liabilities are incurred,regardless of when payment is made.
The Fund's independent auditors have audited the financial statements and issued unmodified opinions as of
and for the years ended September 30,2021 and 2020.The purpose of the audit is to give reasonable assurance
to users of those financial statements, the Board, and participants of the Fund, that the financial statements
present fairly,in all material respects,information regarding the Fund's Fiduciary Net Position in conformity
with GAAP.
A significant responsibility of the staff is to ensure that the Fund has in place an adequate system of internal
control.A system of internal control is defined as systematic measures instituted by an organization to achieve
the following objectives:
1. Conduct its business in an efficient manner;
2. Safeguard its assets and resources;
3. Deter and detect errors,fraud,and theft;
4. Ensure accuracy and completeness of its accounting data;
S. Produce reliable and timely financial and management information;and
6. Promote adherence to management's policies and procedures.
i
These controls include design of business systems, appropriate segregation of duties and responsibilities,
sound practices,and capable personnel.There are limits to internal control,such as the cost to mitigate some
risks may outweigh the risk itself,internal controls may be overridden, or collusion may foil control design.I
believe the Fund's internal controls are adequate and are working as designed.
Financial Information
An overview of the fiscal operations of the Fund is presented in the Management's Discussion and Analysis
(MD&A) preceding the financial statements in the Financial Section. It provides a narrative introduction,
overview,and analysis of the basic financial statements.The MD&A compliments this letter of transmittal and
should be read in conjunction with it.
Fund Overview
The Fund is a multiple employer agent defined benefit pension plan.The Fund covers employees of the City of
Fort Worth (City Plan) and the employees of the Fund (Staff Plan). The City Plan was established by City
Ordinance in 1945 and the Staff Plan was established through Administrative Rules in 2007.The Fund provides
retirement,disability,and death benefits to its members.All employees of the City of Fort Worth and the Fund
are members except elected officers and non-salaried appointed members of administrative boards and
commissions, part-time, temporary and contract employees, and employees paid in part by another
governmental agency.The two plans are comingled for investment purposes and are both administered by the
13-member Retirement Fund Board of Trustees.Each plan has a separate actuarial valuation completed each
year and its own funded status based on current and projected assets and liabilities.
The Retirement Fund Board of Trustees (the Board) is comprised of four active members of the Fund,three
retired members of the Fund,and six Trustees appointed by the City Council of Fort Worth,Texas.All Board
members serve a two-year term commencing on September 1st;there are no term limits.The Board selects a
chairperson and a vice-chairperson annually,in September.
Investments
The Fund's primary investment objective is to establish a stable,diversified investment portfolio that in the long-
term,will meet or exceed the Board approved assumed actuarial rate of return in order to maintain or improve the
funded status of the Fund and provide sufficient liquidity to timely pay benefits. The Trustees adopted the following
key investment objectives.
• The Board's investment objective is to achieve an average long-term total rate of return which satisfies the
actuarial assumed rate of return. The target actuarial rate of return is set at 7.00%including an assumed
inflation rate of 2.50%and a target actuarial real rate of return of 4.50%.
• The Fund shall prudently manage overall risk through diversification,by establishing and updating a strategic
asset allocation using an asset allocation model that balances return expectations and risk exposures related
to institutionally investible geographies,asset classes,and investment strategies.
• The Fund shall periodically rebalance the total assets to manage active risk relative to the strategic asset
allocation and various benchmarks,as well as liquidity.Rebalancing activities shall consider both the impact
on the Fund and transaction cost of the activity.
• The investment activities of the Fund shall be executed in a cost-effective manner.
The Fund ended the fiscal year with a $2.8 billion fund balance and an annualized net return of 22.44%.
Additionally,the Fund outperformed the actuarial assumed rate of 7.0%. For the three-year,five-year,and ten-
year periods the Fund has returned 9.77%,9.58%,8.65 annualized,respectively.
ii
Actuarial Funding Status
Pursuant to the provisions of the Fund, the Board engages an independent actuarial firm to perform annual
actuarial valuations. The Fund's funding objective is to ensure contributions, when combined with present
assets and future investment returns,will be sufficient to meet the financial obligations to present and future
retirees and beneficiaries.
Annual actuarial valuations measure the progress toward these goals, as well as the adequacy of the
contribution rate.The Fund's actuary assumes that the Fund's investments will return 7.0%over the long-term.
The differences between the assumed and the actual investment return are phased in (smoothed) over five
years yielding an actuarial value of assets.
The Actuarial Value of Assets (AVA),Actuarial Accrued Liability(AAL),and the Funded Ratio of the City and
Staff Plans,based on the actuarial valuation,as of December 31,2020,are as follows:
AVA,AAL and Funded Ratio - December 31, 2020
Funded
Plan Assets (AVA) Liabilities (AAL) (Ratio)
City $ 2,522,727,631 $ 4,745,801,026 53.2%
Staff $ 6,592,997 $ 9,327,374 70.7%
A schedule of funding progress is included in the actuarial section.The funded status of the Fund is reviewed
annually. Experience studies are conducted every three to five years with the most recent being completed
December 31,2018. The Fund will complete another experience study within the five-year window.
Major Initiatives
2021 was a year of change and significant progress for the Fund.In October, the Fund hired a new Chief
Investment Officer(CIO).Following the appointment of the CIO,the Fund issued a Request for Proposals(RFP)
from consulting firms.In August,the Fund hired two firms to provide this service,Verus and Aksia.
After the new consultants were successfully onboarded, the Fund followed best practices by conducting an
asset liability study.The information from this study will help the staff and Board better understand the unique
aspects of the plan as they review our asset allocation.During 2022,the Board will set a new asset allocation,
and staff will rebalance existing accounts and make new investments to achieve the new allocation.
Another major initiative for the Fund is the transition to a new Pension Administration System(PAS).The new
system, Neospin,will allow Fund staff to handle many of our administrative processes in-house and further
enable staff to access key information in a more timely manner.The system also has an enhanced web portal
to serve our members better. The new PAS is well into the pilot stage, and implementation is scheduled for
December 2022.
Certificate of Achievement
The Government Finance Officers Association(GFOA)of the United States and Canada awarded a Certificate of
Achievement for Excellence in Financial Reporting to the Fund for its Annual Report for the fiscal year ended
September 30,2020.This was the eleventh year that the Fund has earned this prestigious award.In order to
be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently
iii
organized Annual Report. This report must satisfy both generally accepted accounting principles and
applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only.We believe that our current Annual Report
continues to meet the Certificate of Achievement Program's requirements,and we are submitting it to the GFOA
to determine its eligibility for another certificate.
Public Pension Standards Award
For 2021, the Fund earned the Public Pension Coordinating Council Recognition Award for Funding and
Administration.This is the seventh year that the Fund has received this award.This award is in recognition of
meeting professional standards for plan administration as set forth by the Council.The standards serve as a
benchmark by which to measure public defined benefit plans.
Acknowledgments
The preparation of the Annual Report in a timely manner is made possible by the dedicated teamwork of the
Fund's staff, under the leadership, dedication,and support of the Board. I am sincerely grateful to the Board
and staff,as well as to all our professional service providers,who perform so diligently to ensure the successful
operation and financial soundness of the Fund.
Respectfully submitted,
Benita Falls Harper,Executive Director
iv
Certificate of Achievement
2012 2017
i.
r.
V � i
GOVERNMENT FINANCE OFFICERS ASSOCIATION
2013 2018 k
Certificate of Achievement ,
for Excellence � -
in Financial Reporting 4
2014 2019 -
Presented to
Fort Worth
2013 Employees' Retirement Fund 2020
Texas ;
2016
a
The Government Finance Officers Association(GFOA) of the United States and Canada awarded a
Certificate of Achievement for Excellence in Financial Reporting to the Fort Worth Employees'
Retirement Fund for its Annual Report for the fiscal year ended September 30,2020.
v
Award for Administration
P C
Public Pension Coordinating Council
Public Pension Standards Award
For Funding and Administration
2021
Presented to
Fort Worth Employees- Retirement Fund
In recognition of meeting professional standards for
plan funding and administration as
set forth in the Public Pension Standards.
Presented by the Public Pension Coordinating Council,a confederation of
National Association of State Retirement Administrators (NASRA)
National Conference on Public Employee Retirement Systems (NCPERS)
National Council on Teacher Retirement(NCTR)
d'&'4 W-Ova
Alan H.Winkle
Program Administrator
Vi
Board of Trustees
As of September 30,2021
Todd Cox, Kevin Foster,
Board Chair Board Vice-Chair
Active Employee Retired Employee
Fire Department Police Department
Elected to Place 2 Elected to Place 6
Lloyd Cook Loraine Coleman Andrea Wright
Liz
Active Employee Active Employee Active Employee
Police Department General Employees General Employees
Elected to Place 1 `-' Group C Group D
Elected to Place 3 Elected to Place 4
t Tom Lewis Marsha Anderson Jesus Payan
Retired Employee Retired Employee Appointed Trustee
Fire Department 41, General Employees Place 8
Elected to Place 5 Elected to Place 7
t0% I
VACANT Steve Litke Bryan Barrett
Appointed Trustee Appointed Trustee Appointed Trustee
Place 9 Place 10 Place 11
F'
Jim Lacamp Reginald Zeno
Appointed Trustee CFO,
Place 12 City of Fort Worth
Standing Seat
Place 13
vii
Administrative Organization
Benita Falls Harper Derrick Dagnan Robert Hulme Eleza Abdul
Executive Director Chief Investment Officer Director of Operations Acting Benefits Manager
Mary Chang Christina Wu Karen Epp Carla Perez
General Counsel Investment Officer Accounting Manager Member Services Specialist
Annette Connor Branden George Christian Wetshi Mary Braddock
Executive/Legal Investment Analyst Senior Accountant Member Services Specialist
Assistant
Charles Henry Brad Duckworth
IT Systems Administrator Member Services Specialist
Vacant Victoria Valles-Miller
Communications Spclst. Member Services Assistant
Rebecca Earley Joanna White
Operations Assistant Member Services Assistant
Desiree Trevino Mary Beth Lane
Administrative Assistant Pension Administration
System Analyst
Professional Service Providers
Actuary Custodian Investment Consultants
Gabriel,Roeder,Smith&Company Northern Trust Aksia,LLC
Verus Advisory,Inc.
Auditors Legal Counsel
Eide Bailly,LLP DLA Piper,LLP
Jackson Walker,LLP
Ice Miller,LLP
A complete list of Investment Management Fees can be found on page 51, Investment Managers on page 59,
Investment Management, Performance, and Brokers' Fees by Asset Class on page 64, and the Schedule of
Brokers'Fees on page 65.
viii
City Plan: Summary of Key Provisions
Membership An employee becomes a member upon regular employment with the City and
contributes to the Fund.
Definitions Key Terms:
• Final Average Compensation (FAC): average annual earnings over the member's
highest three or five calendar years of service.
• Credited Service: length of time employed by the City of Fort Worth and making
contributions to the Fund or purchased service.
• Group I-General employees hired prior to July 1,2011.
• Group II-General employees hired on or after July 1,2011.
• Group III-Police Officers hired prior to January 1,2013.
• Group IV-Police Officers hired on or after January 1,2013.
• Group V-Firefighters hired prior to January 10,2015.
• Group VI-Firefighters hired on or after January 10,2015.
Contributions Employer(Ci!y
• Contributes 24.24% for Group I General employees and Group V Firefighters on
regular retirement eligible earnings,overtime,vacation sellback,and wellness.
• Contributes 24.24%for Group II General employees and Group VI Firefighters on
regular retirement eligible earnings only.
• Contributes 24.96% for Group III Police Officers on regular retirement eligible
earnings,overtime,vacation sellback,and wellness.
• Contributes 24.96% for Group IV Police Officers on regular retirement eligible
earnings only.
Member(Regular City Employee .
On or after July 19,2019:
• A Group I General employee contributes 9.35% on regular retirement eligible
earnings,vacation sellback, overtime, and wellness. In addition, for the length of
time the employee has service prior to October 1, 2013, they contribute an
additional 0.7%on the same earnings.
• A Group II General employee contributes 9.35% on regular retirement eligible
earnings and overtime.
• A Group III Police Officer contributes 10.53% on regular retirement eligible
earnings,vacation sellback,overtime,and wellness.
• A Group IV Police Officer contributes 10.53% on regular retirement eligible
earnings and overtime.
• A Group V Firefighter contributes 10.05%on regular retirement eligible earnings,
built-in overtime,regular overtime,vacation sellback,and wellness.
• A Group VI Firefighter contributes 10.05%on regular retirement eligible earnings,
built-in overtime and regular overtime.
ix
On or after January 1,2020:
• A Group I General employee contributes 9.35% on regular retirement eligible
earnings,vacation sellback, overtime, and wellness. In addition,for the length of
time the employee has service prior to October 1, 2013, they contribute an
additional 0.7%on the same earnings.
• A Group II General employee contributes 9.35% on regular retirement eligible
earnings and overtime.
• A Group III Police Officer contributes 12.53% on regular retirement eligible
earnings,vacation sellback,overtime,and wellness.
• A Group IV Police Officer contributes 12.53% on regular retirement eligible
earnings and overtime.
• A Group V Firefighter contributes 12.05%on regular retirement eligible earnings,
built-in overtime,regular overtime,vacation sellback,and wellness.
• A Group VI Firefighter contributes 12.05%on regular retirement eligible earnings,
built-in overtime and regular overtime.
On or after January 1,2021:
• A Group I General employee contributes 9.35% on regular retirement eligible
earnings,vacation sellback, overtime, and wellness. In addition, for the length of
time the employee has service prior to October 1, 2013, they contribute an
additional 0.7%on the same earnings.
• A Group II General employee contributes 9.35% on regular retirement eligible
earnings and overtime.
• A Group III Police Officer contributes 13.13% on regular retirement eligible
earnings,vacation sellback,overtime,and wellness.
• A Group IV Police Officer contributes 13.13% on regular retirement eligible
earnings and overtime.
• A Group V Firefighter contributes 12.05%on regular retirement eligible earnings,
built-in overtime,regular overtime,vacation sellback,and wellness.
• A Group VI Firefighter contributes 12.05%on regular retirement eligible earnings,
built-in overtime and regular overtime
Vesting Vesting occurs following five years of credited service.
Retirement Eli b ility:
Pension • Normal Retirement - A member's age and years of service equal 80 points. For
Group II members,the minimum retirement age is 55.
• Attainment of age 65 with five or more years of service.
• Early Retirement- Groups I, III, IV, V, and VI may elect an early retirement and
receive a reduced pension at age 50 with five or more years of service.For Group
II members,the minimum retirement age is 55 for early retirement.
• Special Retirement- Groups III and IV members may retire after completing 25
years of service regardless of age or points.
X
Benefit Calculation:
• Groups I and III-Benefits are calculated using a multiplier of 3%of the high three
FAC earnings multiplied by total credited years of service prior to October 1,2013.
From October 1,2013 forward,benefits are calculated using a multiplier of 2.5%
of the high five FAC multiplied by total credited years of service on or after October
1,2013.
• Group V- Benefits are calculated using a multiplier of 3% of the high three FAC
earnings multiplied by total credited years of service prior to January 10, 2015.
From January 10,2015 forward,benefits are calculated using a multiplier of 2.5%
of the high five FAC multiplied by total credited years of service on or after January
10,2015.
• Groups II,IV,and VI-Benefits are calculated using a multiplier of 2.5%of the high
five FAC multiplied by total credited years of service.
• For members in Groups I, III,and V that were not hired or vested by October 23,
2007,the high three FAC is capped by using their fourth highest year and limiting
each higher year to 12%above the preceding amount.
Payment Options:
• Under normal or special retirement,a member may elect to receive between 5%
and 25% of the actuarial value of their retirement benefit in a lump sum and
receive a reduced monthly pension benefit.
Deferred A member who has attained the normal retirement date may elect to remain in active
Retirement service with the City and defer retirement by participating in the Deferred Retirement
Option Program(DROP).
• DROP allows a member to accrue a monthly amount in their DROP account equal
to what they would have received if they had retired(Retirement Pension).
• The member will receive the balance of that account at actual separation from
active City employment.
• If a member remains in DROP for more than 72 months, there will no longer be
accruals made to their DROP account.
Disability When a member is injured on or off the job, they have the option to apply for the
Retirement disability benefit. Disability benefits are subject to Board approval.For Disability,the
Pension multiplier used for Groups I and III on credited service prior to October 1, 2013 and
Group V on credited service prior to January 10, 2015 is 2.75%, and on or after the
respective dates the multiplier on credited service is 2.25%.For Groups II, IV,and VI,
the multiplier is 2.25%on credited service. If the disability was in the line of duty,the
years of service are projected to normal or special retirement.
Early A vested member may elect to retire early after meeting the age requirements (see
Retirement Eligibility). The multiplier for Groups I and III prior to October 1, 2013 and Group V
Pension prior to January 15, 2015 is 2.75%. On or after the respective dates the multiplier is
2.25%.For Groups II, IV,and VI,the multiplier is 2.25%.There is a penalty of 5%per
year for electing this option prior to normal retirement eligibility.
xi
Vested A member with at least five years of credited service (vested) who separates from
Termination service may choose to leave their contributions with the Fund and receive a vested
Pension termination pension benefit at a later date. Members who take a vested termination
pension are not eligible to take an actuarial equivalent lump sum.
Death Benefits Death Before Retirement:
• If a member dies in the line of duty, the surviving spouse will receive a monthly
pension of 75% of the member's accrued pension benefit projected to normal
retirement.
• If the death is not in the line of duty, but occurs after a member is vested, the
surviving spouse will receive a monthly pension of 75%of the member's accrued
unreduced pension based on actual years of credited service.
• If the death is not in the line of duty and occurs before the member is vested,the
surviving spouse or designated beneficiary will receive a refund of the member's
contributions plus interest.
Death After Retirement:
• If a Group I, III, or V member dies after retiring, provided that member and the
surviving spouse have been married for at least one year prior to member's
retirement date, the surviving spouse will receive 75% of the member's current
pension.
• A Group II,IV,or VI member does not have any automatic survivor benefits.They
may elect to take an actuarially reduced pension at retirement to provide survivor
benefits to a designated beneficiary.
• All members may elect to take an actuarially reduced pension to provide survivor
benefits to a designated beneficiary, if they are unmarried at the time of
retirement.
Cost of Living Unon Retirement:
Adjustments Groups I and III for service prior to October 1, 2013 and Group V for service prior to
(COLA) January 10, 2015,who retire or enter DROP by January 1, 2021,by election have one
of the following two options:
• Simple 2% COLA-An annual 2% fixed increase is awarded January 1st of every
year.The 2%is calculated on the original base pension and will not change.
• Ad-Hoc COLA-The annual increase is awarded on January 1st and may vary each
year from 0%to 4%.The COLA amount is based on the funding status of the plan
and is compounded.
Groups I and III for service on or after October 1,2013 through July 19,2019 and Group
V on or after January 10,2015 through July 19,2019have the Simple 2%COLA,if they
retire or enter DROP by January 1,2021.
Groups I,III and V for all service prior to July 19,2019,who are not retired or enrolled
in DROP on or before January 1, 2021 have a Variable COLA or 13th check subject to
actuarial conditions and approval of the Fund Board of Trustees and City Council.There
is no COLA for service after July 19,2019.
Groups II,IV,and VI are not eligible for any COLA.
xii
Staff Plan: Summary of Key Provisions
Membership An employee becomes a member upon regular employment with the Fort Worth
Employees'Retirement Fund(the Fund)and contributes to the Fund.
Definitions Key Terms:
• Final Average Salary: average annual salary over the member's highest three
calendar years of service.
• Credited Service: length of time employed by the Fund and making contributions to
the Fund or purchased service.
Contributions Employer and Member:
• The Fund contributes the actuarially determined amount each year.
• Members shall contribute 10.50%of their annual salary each year.
Vesting Vesting occurs following five years of credited service.
Retirement Eligibility:
Pension • Normal Retirement_A member's age and years of service equal 80 points.
• Attainment of age 65 with five or more years of service.
• Early Retirement-Attainment of age 50 with five or more years of service may elect
an early retirement and receive a reduced pension.
Benefit Calculation:
Benefits are calculated using a multiplier of 3%of the three-year highest average salary
multiplied by total credited years of service.
Payment Options:
Under normal retirement, a member may elect to receive between 5% and 25% of the
actuarial value of their retirement benefit in a lump sum and receive a reduced monthly
pension benefit.
Deferred A member who has attained the normal retirement date may elect to remain in active
Retirement service with the Fund and defer retirement by participating in DROP.
• DROP allows a member to accrue a monthly amount in their DROP account equal to
what they would have received if they had retired.
• The member will receive the balance of that account at actual separation from service
date.
• If a member remains in DROP for more than 60 months, there will no longer be
accruals made to their DROP account.
Disability When a member is injured on or off the job,they have the option to apply for the disability
Retirement benefit Disability benefits are subject to Board approval and use a 2.75% multiplier in
Pension the benefit calculation.
xiii
Early Retirement A vested member may elect to retire early after meeting the age requirements. Early
Pension retirement benefits are subject to Board approval.The multiplier is 2.75%and there is a
penalty of 5%per year for electing this option prior to normal retirement eligibility.
Vested A member with at least five years of credited service(vested)who separates from service
Termination may choose to leave their contributions with the Fund and receive a vested termination
Pension pension benefit at a later date.Members who take a vested termination pension are not
eligible to take an actuarial equivalent lump sum.
Death Benefits Death Before Retirement:
• If a member dies in the line of duty, the surviving spouse will receive a monthly
pension of 75% of the member's accrued pension benefit projected to normal
retirement.
• If the death is not in the line of duty,but occurs after a member is vested,the surviving
spouse will receive a monthly pension of 75% of the member's accrued unreduced
pension based on actual years of credited service.
• If the death is not in the line of duty and occurs before the member is vested, the
surviving spouse or designated beneficiary will receive a refund of the member's
contributions plus interest.
Death After Retirement:
• If a member, who retired on or before September 30, 2019, dies after retiring,
provided that member and the surviving spouse have been married for at least one
year prior to member's retirement date,the surviving spouse will receive 75%of the
member's current pension.
• If a member,who retired on or after October 1,2019,dies after retiring,provided that
member and the surviving spouse have been married for at least one year prior to
member's retirement date, the surviving spouse will receive 50% of the member's
current pension.
• A member who retires after October 1,2019 may elect to take an actuarially reduced
pension at retirement to increase the surviving spouse benefit.
Cost of Living Unon Retirement:
Adjustments As of October 1, 2019, all active employees and new hires will receive the 1% COLA
(COLA) beginning at age 60.Members who retired prior to October 1,2019 receive the 2%COLA
unless they were terminated prior to February 24, 2016. Terminated Vested members
prior to February 24,2016 will receive the Ad-Hoc COLA.
• Simple 2%COLA-An annual 2%fixed increase is awarded January 1st of every year.
The 2%is calculated on the original base pension and will not change.
• Simple 1%COLA-An annual 1%fixed increase is awarded January 1st of every year
after the retired member reaches age 60. The 1%is calculated on the original base
pension and will not change.
• Ad-Hoc COLA - The annual increase is awarded on January 1st and may vary each
year from 0%to 4%.The COLA amount is based on the funding status of the plan and
is compounded.
xiv
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Independent Auditor's Report
To the Board of Trustees of the
Employees' Retirement Fund of the
City of Fort Worth,Texas
Report on the Financial Statements
We have audited the accompanying combined financial statement of the Employees' Retirement Fund of the City of
Fort Worth,Texas (the Fund),which comprise the combined statements of fiduciary net position as of September
30, 2021 and 2020, and the related combined statements of changes in fiduciary net position, for the years then
ended,and the related notes to the combined financial statements.
Report on the Financial Statements
We have audited the accompanying combined financial statements of the Employees' Retirement Fund of the City
of Fort Worth,Texas(the Fund),which comprise the combined statements of fiduciary net position as of September
30, 2021 and 2020, and the related combined statements of changes in fiduciary net position, for the years then
ended,and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement,whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these combined financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of America and
the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller
General of the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements.The procedures selected depend on the auditor's judgment, including the assessment of the risks of
material misstatement of the financial statements,whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such
opinion.An audit also
1
includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the combined financial
statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Opinions
In our opinion,the financial statements referred to above present fairly, in all material respects,the respective
combined fiduciary net position of the Employees'Retirement Fund of the City of Fort Worth,Texas,as of September
30,2021 and 2020,and the respective combined changes in fiduciary net position for the years then ended in
accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's discussion
and analysis,schedule of changes in net pension liability(City and Staff), schedule of net pension liability, schedule
of actuarially determined employer contributions,and schedule of combined money-weighted investment returns
(collectively the required supplementary information)on pages 3-7 and 39-47 be presented to supplement the basic
financial statements. Such information,although not a part of the basic financial statements, is required by the
Governmental Accounting Standards Board,who considers it to be an essential part of financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical context. We have applied
certain limited procedures to the required supplementary information in accordance with auditing standards
generally accepted in the United States of America,which consisted of inquiries of management about the methods
of preparing the information and comparing the information for consistency with management's responses to our
inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial
statements. We do not express an opinion or provide any assurance on the information because the limited
procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming a opinions on the combined financial statements that
collectively comprise the Fund's basic financial statements as a whole. The introductory, investment, actuarial and
statistical sections are presented for purposes of additional analysis and are not a required part of the combined
financial statements.
The additional supplementary information accompanying financial information listed as other supplementary
information in the table of contents are the responsibility of management and were derived from and relate directly
to the underlying accounting and other records used to prepare the basic financial statements.Such information has
been subjected to the auditing procedures applied in the audit of the basic financial statements and certain
additional procedures, including comparing and reconciling such information directly to the underlying accounting
and other records used to prepare the basic financial statements or to the basic financial statements themselves,
and other additional procedures in accordance with auditing standards generally accepted in the United States of
America. In our opinion,the accompanying financial information listed as supplemental schedules are fairly stated,
in all material respects, in relation to the basic financial statements as a whole.
The introductory, investment,actuarial and statistical sections have not been subjected to the auditing procedures
applied in the audit of the basic financial statements and,accordingly,we do not express an opinion or provide any
assurance on them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards,we have also issued our report dated December 16, 2021, on
our consideration of the Fund's internal control over financial reporting and on our tests of its compliance with
certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that
report is solely
2
to describe the scope of our testing of internal control over financial reporting and compliance and the results of
that testing,and not to provide an opinion on the effectiveness of the Fund's internal control over financial reporting
or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering Fund's internal control over financial reporting and compliance.
Z�
December 16,2021
Boise,Idaho
3
Management's Discussion and Analysis (Unaudited)
The Board of Trustees (the Board) of the Employees' Retirement Fund of the City of Fort Worth, Texas (the
Fund)is pleased to provide this overview and analysis of the financial performance and activities of the Fund
for the fiscal years ended September 30, 2021 and 2020.We encourage readers to consider the information
presented here in conjunction with the financial statements that follow.
Overview of Financial Statements
The Management's Discussion and Analysis is intended to serve as an introduction to the Fund's basic financial
statements. The Fund's financial statements are composed of financial statements and notes to the financial
statements. This report also contains required supplementary information in addition to the basic financial
statements.
Financial Statements
There are two basic financial statements presented within this annual report. The Combined Statements of
Fiduciary Net Position as of September 30,2021 and 2020 give a snapshot of the financial position of the Fund
at a particular point in time.The Combined Statements of Changes in Fiduciary Net Position for the fiscal years
ended September 30, 2021 and 2020 provide a view of the fiscal years'additions to and deductions from net
position.
Notes to Financial Statements
The notes are an integral part of the basic financial statements and provide additional background information
that is essential to gain a complete understanding of the data provided within the Fund's financial statements.
Required Supplementary Information
The required supplementary information consists of the Schedule of Changes in Net Pension Liability - City
Plan, Schedule of Changes in Net Pension Liability - Staff Plan, the Schedule of Net Pension Liability, the
Schedule of Actuarially Determined Employer Contributions and Combined Schedule of Money-Weighted
Investment Returns and Notes to Required Supplementary Information.
Other Supplementary Information
The other supplementary information consists of the Schedule of Administrative Expenses, the Schedule of
Investment Management Fees,and the Schedule of Professional Services.
Financial Highlights
The Fund's net position increased by$464,294,918 in fiscal year 2021 compared to an increase of$55,843,984
in 2020 and a decrease of($11,183,519)in 2019.The Fund's increased net position is a result of contributions
and investment income exceeding benefit payments and refunds paid out by the Fund. In 2021, investment
income and contributions exceeded benefit payments and refunds by $470,415,743 compared to a 2020
difference of$61,178,068,and a 2019 difference of($5,421,680).During fiscal year 2021,investment income
totaled$525,425,305,compared to$110,848,700 in 2020 and$67,899,773 in 2019.The following table shows
a summary of the Fund's net position.
4
Combined Fiduciary Net Position
September 30,2021,2020,and 2019
2021 2020 2019
Assets
Cash $ 107,585 $ 159,222 $ 129,406
Receivables from Securities Sold 155,072,129 190,963,266 210,963,804
Other Receivables and Prepaid Experts 15,800,600 13,118,129 11,882,728
Investments 3,015,428,655 2,506,931,126 2,503,809,531
Capital Assets,Net 4,524,627 2,870,137 2,987,135
Total Assets 3,190,933,596 2,714,041,880 2,729,772,604
Liabilities
Payables for Securities Purchased 177,845,110 239,986,072 281,455,382
Obligations Under Securities Lending 174,422,862 99,508,929 129,464,532
Other Liabilities 207,011 383,184 532,979
Total Liabilities 352,474,983 339,878,185 411,452,893
Net Position Restricted for Pensions $ 2,838,458,613 $ 2,374,163,695 $ 2,318,319,711
Combined Changes in Fiduciary Net Position
For Fiscal Years Ended September 30,2021,2020,and 2019
2021 2020 2019
Additions
Contributions $ 189,153,625 $ 181,473,046 $ 154,113,159
Investment Income (Loss),Net 525,425,305 110,848,700 67,899,773
Total Additions 714,578,930 292,321,746 222,012,932
Deductions
Benefit Payments 238,975,451 227,370,496 221,699,004
Refund of Contributions 5,187,736 3,773,182 5,735,608
Administrative Expenses 5,999,639 5,215,391 5,639,269
Depreciation 121,186 118,693 122,570
Total Deductions 250,284,012 236,477,762 233,196,451
Change in Net Position AL 464,294,918 b 55,843,984 r (11,183,519)
Fiduciary Net Position,Beginning of S 2,374,163,695 2,318,319,711 2,329,503,230
Net Position Restricted for Pensions $ 2,838,458,613 $ 2,374,163,695 $ 2,318,319,711
Financial Analysis
During fiscal year 2021,the Fund's investment portfolio returned 22.44%net of fees,compared to 4.86%for
2020 and 3.03%for 2019.The Fund posted an impressive fiscal year 2021 net return of 22.44%.This
compares favorably versus the actuarial target return of 7.0%,the 4.86%net return in 2020 and the 3.03%
net return in 2021.The impressive one-year return was driven by strong returns in all asset classes except
fixed income.Over the long-term,the Fund posted a 3-year and 5-year net return of 9.8%and 9.6%,
respectively.
On a relative basis,the fiscal year 2021 total Fund net return exceeded the policy implementation index by
1.7% and outperformed the median large pension fund. For the fiscal year all asset classes except for public
5
equities outperformed the asset class benchmark.At this time, the Fund has outperformed the policy index
modestly across all time periods.
The strong one-year returns were driven by a rebound from the COVID-19 economic disruption and the
unprecedented level of global fiscal and monetary stimulus deployed by large Central Banks.Over the last year,
the Fund has benefitted from positioning and favorable performance of risky assets. Specifically, the fund
benefitted from overweights in small cap equities and inflation sensitive real assets,both of which had posed a
challenge in previous years.
With respect to public equities,the largest asset in the asset allocation,the Fund posted a strong net return of
28.3%,which compares favorably versus 6.84% in 2020 and -1.44% in 2019. On a relative basis, the equity
portfolio underperformed the MSCI All Country World Index by -1.1% for the fiscal year. The
underperformance was primarily driven by an underweight to U.S.stocks.
With respect to investment grade fixed income, the Fund posted a net return of -0.2%, which compares
unfavorably versus 7.4% in 2020 and 9.2% in 2019. On a relative basis, the fixed income portfolio
outperformed the Bloomberg U.S.Agg Index by 0.7%for the fiscal year.Interest rate positioning was the major
driver of the weak absolute return and the strong relative performance was driven by credit exposure and
security selection.
With respect to alternative asset classes,the net returns were a significant positive and far outpaced the results
of 2020 and 2019.The private equity portfolio posted a net return of 60.8%and outperformed the Russell 2000
+3% benchmark by 25.0%. The diversified opportunities portfolio returned 15.2% and outperformed the
benchmark by 5.3%.The real assets portfolio posted a net return of 17.3%and outperformed the benchmark
by 3.7%. These asset classes offer a differentiated source of risk and return compared to traditional equities
and fixed income.
The Fund's combined employer contributions were$128,543,995 in 2021 compared to$125,097,743 in 2020
and $113,351,227 in 2019. Employee contributions and purchased future service, net of refunded
contributions were $55,421,894 compared to $52,601,821 in 2020 and $35,026,324 in 2019. Increased
employer contributions were due to a 4.5% increase in the contribution rate starting January 1, 2019. The
increased employee contributions for 2021 are due to an increase on January 1, 2021, to 9.35% for general
employees, 12.05% for sworn fire fighters, and 13.13 for sworn police. In January 2020, both sworn fire
fighters and sworn police had 2%increase in contributions. In 2019,an ordinance change increased general
employees by 1.1%and sworn police and firefighters by 1.8%.
Benefit payments increased by $11,604,955 in 2021 compared to an increase of$5,671,493 in 2020 and an
increase of$9,156,188 in 2019.Benefits increased as a result of new retirees adding to the benefit payroll and
from some retirees receiving the 2%Cost of Living Adjustment(COLA).
6
Funding Progress
The actuarial reporting measurements as required by Governmental Accounting Standards Board(GASB) are
the total pension liability, net pension liability, and fund fiduciary net position as a percentage of the total
pension liability.The census data used is as of December 31,2020,and all other measurements are calculated
as of the fiscal year end of the Fund:September 30,2021.For the City Plan these measurements are as follows
Funding Progress
Fiscal Years Ending September 30
in billions
Total Net Position
Pension Fund Fiduciary Net Pension as a Percent of
Year Liability Net Position Liability Total Pension Liability
2021 $ 4.89 $ 2.83 $ 2.06 57.85%
2020 4.73 2.37 2.36 50.09%
2019 4.57 2.31 2.26 50.59%
2018 5.42 2.32 3.09 42.86%
2017 5A5 2.27 3.08 42.40%
$6-00
$5-00
$4.00
Totalfty
$3-00 =
m
$2-00
Fund Fiduciary Net Position $1-00
?i 1' ?C13 ?C19 2020 2021
7
The Staff Plan will also continue to be measured using an annual valuation performed at calendar year end as
well as evaluated with GASB required disclosures at statement of net position date. For the Staff Plan,these
measurements are as follows:
Funding Progress
Fiscal Years Ending September 30
in millions
Staff Plan
o a Net Position
Pension Fund Fiduciary Net Pension as a Percent of
Year Liability Net Position Liability Total Pension Liability
2021 5 9.96 5 8.02 $ 1.95 80.47%
2020 9.06 6.00 3.06 66.24%
2019 8.04 5.46 2.58 67.88%
2018 6.65 5.17 1.48 77.73%
2017 5.70 4.53 1.17 77.71%
$12.00
$10.00
$8.00
0
$6.00
RinMMW Fid �'sition $4.00
$2.00
$
1;; -C19 2020 2021
Requests for information: This financial report is designed to provide a general overview of the Fund's
finances. Questions concerning any of the information provided should be addressed to the Employees'
Retirement Fund of the City of Fort Worth,3801 Hulen Street,Suite 101,Fort Worth,Texas 76107.
8
Combined Statements of Fiduciary Net Position
September 30,2021 and 2020
Staff Plan Combinedjr City Plan Staff Plan Combined
Totals Totals
2021 2021 2020 2020
Assets
Investments in Trust,at Fair Value
Government Obligations $ 98,539,648 $ 280,057 $ 98,819,705 $ 138,756,198 $ 353,046 $ 139,109,244
U.S.Treasuries 130,787,915 371,710 131,159,625 68,264,902 173,691 68,438,593
Short-term Marketable Securities 106,858,714 303,701 107,162,415 82,758,761 210,569 82,969,330
Corporate Obligations 182,209,369 517,853 182,727,222 215,703,146 548,828 216,251,974
Asset and Mortgage Backed Obligations 40,630,123 115,474 40,745,597 69,126,363 175,883 69,302,246
International Obligations 12,546,462 35,657 12,582,119 14,203,994 36,140 14,240,134
Corporate Stocks 441,576,973 1,254,997 442,831,970 334,788,063 851,823 335,639,886
Commingled Funds 1,198,556,774 3,406,393 1,201,963,167 955,062,686 2,430,029 957,492,715
Alternative Investments 621,248,336 1,765,637 623,013,973 522,648,267 1,329,808 523,978,075
Securities Lending Collateral 173,981,837 441,025 174,422,862 99,257,323 251,606 99,508,929
Total Investments 3,006,936,151 8,492,504 3,015,428,655 2,500,569,703 6,361,423 2,506,931,126
Receivables
Employee Contributions 6,836,880 - 6,836,880 2,828,818 - 2,828,818
Employer Contributions 3,235,082 3,235,082 6,147,111 6,147,111
Other 1,133 - 1,133 1,028 - 1,028
Accrued Income 5,685,321 14,412 5,699,733 4,038,857 10,238 4,049,095
Due From Broker Securities Sold 154,680,032 392,097 155,072,129 190,480,419 482,847 190,963,266
Total Receivables 170,438,448 406,509 170,844,957 203,496,233 493,085 203,989,318
Prepaid Expenses 27,702 70 27,772 91,844 233 92,077
Cash 107,313 272 107,585 158,820 402 159,222
Capital Assets
Building 3,499,775 8,872 3,508,647 3,501,152 8,875 3,510,027
Land 403,976 1,024 405,000 403,976 1,024 405,000
Furniture and Equipment 167,360 424 167,784 185,644 471 186,115
Software 1,734,156 4,395 1,738,551 137,717 349 138,066
Total Capital Assets 5,805,267 14,715 5,819,982 4,228,489 10,719 4,239,208
Accumulated Depreciation (1,292,080) (3,275) (1,295,355) (1,365,609) (3,462) (1,369,071)
Capital Assets,Net 4,513,187 11,440 4,524,627 2,862,880 7,257 2,870,137
Total Assets 3,182,022,801 8,910,795 3,190,933,596 2,707,179,480 6,862,400 2,714,041,880
Liabilities
Due to Broker Securities Purchased 177,395,432 449,678 177,845,110 239,379,272 606,800 239,986,072
Other 206,488 523 207,011 382,215 969 383,184
Obligations Under Securities Lending 173,981,837 441,025 174,422,862 99,257,323 251,606 99,508,929
Total Liabilities 351,583,757 891,226 352,474,983 339,018,810 859,375 339,878,185
Net Position Restricted for Pensions $ 2,830,439,044 $ 8,019,569 $ 2,838,458,613 $ 2,368,160,670 $ 6,003,025 $ 2,374,163,695
The Notes to Combined Financial Statements are an integral part of these statements.
9
Combined Statements of Changes in Fiduciary Net Position
For Fiscal Years Ended September 30,2021 and 2020
Staff Plan Combined Totals Staff Plan Combined Totals
2021 2021 2020 2020
Investment Income
Net Appreciation in Fair Value $ 488,027,622 $ 1,302,615 $ 489,330,237 $ 78,342,164 $ 198,536 $ 78,540,700
Interest and Dividend Income 25,565,989 69,429 25,635,418 26,879,108 66,470 26,945,578
Less:Investment Management Fees (6,165,860) (16,673) (6,182,533) (6,502,567) (15,949) (6,518,516)
Other Income 16,344,742 44,531 16,389,273 11,404,923 27,999 11,432,922
Investment Income Before Securities 523,772,493 1,399,902 525,172,395 110,123,628 277,056 110,400,684
Securities Lending Activities
Securities Lending Income 315,212 856 316,068 558,538 1,381 559,919
Securities Lending Expenses (62,987) (171) (63,158) (111,627) (276) (111,903)
Net Securities Lending Income 252,225 685 252,910 446,911 1,105 448,016
Total Net Investment Income 524,024,718 1,400,587 525,425,305 110,570,539 278,161 110,848,700
Contributions
Employee Contributions 60,281,553 328,077 60,609,630 56,250,684 124,619 56,375,303
Employer Contributions 128,046,174 497,821 128,543,995 124,743,976 353,767 125,097,743
Total Contributions 188,327,727 825,898 189,153,625 180,994,660 478,386 181,473,046
Total Additions 712,352,445 2,226,485 714,578,930 291,565,199 756,547 292,321,746
Benefit Payments
Retirement 188,161,116 181,061 188,342,177 178,887,438 179,160 179,066,598
Disability 5,136,081 - 5,136,081 5,191,272 - 5,191,272
Surviving Spouse 20,499,937 20,499,937 19,111,261 19,111,261
Children 48,594 48,594 39,859 39,859
Actuarial Equivalent 575,710 575,710 724,957 724,957
DROP Payouts 24,372,952 24,372,952 23,236,549 23,236,549
Total Benefit Payments 238,794,390 181,061 238,975,451 227,191,336 179,160 227,370,496
Other Payments
Refunds/Terminations 5,187,736 - 5,187,736 3,773,182 - 3,773,182
Depreciation 120,844 342 121,186 118,393 300 118,693
Administrative 5,971,101 28,538 5,999,639 5,184,903 30,488 5,215,391
Total Other Payments 11,279,681 28,880 11,308,561 9,076,478 30,788 9,107,266
Total Deductions 250,074,071 209,941 250,284,012 236,267,814 209,948 236,477,762
Increase in Net Position 462,278,374 2,016,544 464,294,918 55,297,385 546,599 55,843,984
Beginning 2,368,160,670 6,003,025 2,374,163,695 2,312,863,285 5,456,426 2,318,319,711
Net Position Restricted for Pensions,Ending $ 2,830,439,044 $ 8,019,569 $ 2,838,458,613 $ 2,368,160,670 $ 6,003,025 $ 2,374,163,695
The Notes to Combined Financial Statements are an integral part of these statements.
10
Notes to Combined Financial Statements
Note 1. Plan Description
The following description of the Employees' Retirement Fund of the City of Fort Worth, Texas (the Fund),is
provided for general information purposes only.Participants(or members)should refer to the Plan Documents
for more information.
General
The Fund is a multiple employer agent plan that covers employees of the City of Fort Worth(City Plan)and the
employees of the Fort Worth Employees'Retirement Fund(Staff Plan).The Fund and City Plan were established
by City Ordinance on September 12,1945.The Staff Plan was established through Administrative Rules in 2007
and both plans are governed by State statute (Vernon's Civil Statutes,Title 109,Article 6243i) effective June
15,2007.The City Plan is included in the Financial Statements of the City of Fort Worth.
The Fund provides retirement,disability and death benefits to its members and beneficiaries.All employees of
the City of Fort Worth and the Retirement Fund Staff are members except elected officers and non-salaried
appointed members of administrative boards and commissions,part-time,temporary and contract employees,
and employees paid in part by another governmental agency.The two plans are commingled for investment
purposes and are both administered by the 13-member Retirement Fund Board of Trustees. Each plan has a
separate actuarial valuation completed each year.
The Retirement Fund Board of Trustees (the Board) is comprised of four active members of the Fund,three
retired members of the Fund,and six trustees appointed by the Fort Worth City Council.All Board members
serve a two-year term commencing on September 1st and annually select a chairperson and a vice-chairperson.
The Staff Plan was designed as a carve-out plan,with benefits identical to those of the General City employees
(City of Fort Worth employees who are not civil service,police or fire)in August 2007 and continues with those
benefits. Contribution rates were identical until fiscal year 2011,at which time the City Plan employer rates
increased by 4%.This rate increase was not applied to the Staff Plan.At the time the Staff Plan was established
in August of 2007, there were three Fund employees who were vested in the City Plan.At retirement, those
employees will receive part of their retirement from the City Plan and the rest from the Staff Plan. Since the
creation of the Staff Plan,other vested members of the City Plan have been hired by the Fund.These employees
also will receive part of their retirement from the respective Plan in which they earned credit.The remaining
Fund employees will receive any retirement benefits due to them from the Staff Plan only.The first actuarial
valuation for the Staff Plan was completed as of January 1,2008.Changes to the Staff Plan are determined by
the Board.
The City has received a favorable letter of determination from the Internal Revenue Service(IRS)that its Plan
is qualified under Section 401(a)of the Internal Revenue Code.The authority to define or amend employer and
employee contribution rates or benefits is given to the Fort Worth City Council(the City Council).The City Plan
is considered part of the City's financial reporting entity and is included in the City's basic financial statements.
The City s payroll for employees covered by the City Plan for the years ended September 30, 2021 and 2020
was approximately$523 and$510 million,respectively.
Effective June 15, 2007, article 6243i of the Texas Revised Civil Statutes (Article 6243i) redefined the
composition and structure of the Board, providing authority to the Board for benefit administration, asset
investment and actuarial assumptions and authority to the Fund sponsor for benefit design and contribution
11
percentage. Article 6243i also permitted the Board to create administrative rules that govern the
administration of benefits of the Fund.
The Board may change the administrative operation of the Fund without the City's approval, while any
increases to the benefit structure must be approved by the City,following an actuarial assessment.A reduction
in benefits must be approved by the City,and the City must notify the Board 90 days in advance of such benefit
reduction.
As of September 30,2021 and 2020,the Fund's membership consisted of the following members:
Combined Plan Membership
Years ended September 30
2021 2020 2021 2020
Retirees currently receiving benefits 4,036 3,903 4 4
Beneficiaries currently receiving benefits 793 776 0 0
Terminated employees entitled to 401 398 6 6
Terminated employees entitled to a 888 769 1 1
Total Non-Active Members 6,118 5,846 11 11
Active Members
Vested 4,456 4,272 10 8
Non-vested 2,059 2,437 8 9
Total Active Members 6,515 6,709 18 17
Total Plan Membership 12,633 12,555 29 28
Vesting
Members vest in the Fund after five years of credited service. Vested members are eligible for normal
retirement on the last day of the month in which the earlier of the following occurs: the member's age plus
years of credited service equals 80 (Rule of 80),or the vested member reaches age 65.Members terminating
employment prior to vesting are entitled to receive their contributions plus interest.Members who are vested
have the option of receiving their contributions plus interest or leaving their contributions in the fund and
receiving retirement benefits as described above.
Pension Benefits
In October of 2012 the City passed an ordinance change amending the benefits for new hire police civil service
and split the benefits for existing police civil service and general employees, making changes similar to the
November 2010 ordinance. Existing Police and General employees will have a different benefit calculation
based on their hire date and dates of service. On September 16, 2014 and October 21, 2014, the City passed
ordinance amendments making similar changes for new hire firefighters and existing firefighters,respectively,
who previously had been unchanged. On December 11, 2018, the City passed an ordinance amending the
benefits for all members. In February 2019 City employees voted in election to increase employee
contributions.
12
The City Plan consists of six groups described generally as follows:
• Group I -A General Employee hired prior to July 1,2011.
• Group II-A General Employee hired on or after July 1,2011.
• Group III -A Police Officer hired prior to January 1,2013.
• Group IV-A Police Officer hired on or after January 1,2013.
• Group V-A Firefighter hired prior to January 10,2015.
• Group VI-A Firefighter hired on or after January 10, 2015.
A member's normal retirement date is determined using the Rule of 80 or age 65 with at least 5 years of credited
service.The City has adopted a 25-year-and-out program for police officers,which allows for full(unreduced)
retirement after 25 years of service,regardless of age.Group II requires a minimum age of 55 at Rule of 80 to
be eligible to retire. Each of the benefits are calculated by using an average annual compensation value
multiplied by years of service and a multiplier percentage. The table below describes the variables for each
group:
Group Multiplier Multiplier Average Annual Average Annual Credited years
Number for Service for Service Compensation for Compensation for of benefit
prior to on or after service prior to service on or after service
10/01/2013 10/01/2013 10/01/2013 10/01/2013 Ah
Group 3% 2.5% Average of Average of Actual years
I highest 3 highest 5 and months of
(overtime (overtime credited service
included) excluded)
Group 2.5% 2.5% Average of Average of Actual years
II highest 5 highest 5 and months of
(overtime, (overtime, credited service
wellness,vacation wellness,vacation
and sellback and sellback
excluded) excluded)
Group 3% 2.5% Average of highest Average of highest Actual years and
III 3 (overtime 5 (overtime months of
included) excluded) credited service
Group 2.5% NA Average of highest Average of highest Actual years and
IV 5 (overtime, 5 (overtime, months of
wellness,vacation wellness,vacation credited service
and sellback and sellback
excluded) excluded)
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Group Multiplier Multiplier Average Annual Average Annual Credited years
Number for Service for Service Compensation for Compensation of benefit
prior to on or after service prior to for service on or service
01/10/2015 01/10/2015 01/10/2015 after
01/10/2015
Group 3% 2.5% Average of highest Average of Actual years
V 3 (overtime highest 5 and months of
included) (overtime credited
excluded) service
Group NA 2.5% Average of highest Average of Actual years
VI 5 (overtime, highest 5 and months of
wellness,vacation (overtime, credited
and sellback wellness, service
excluded) vacation and
sellback
excluded)
Cost of Living Adjustment(COLA)
Members of Groups I,III and V,as defined in the City ordinance,receive COLAs based on their selection of either
simple 2%COLA or the ad-hoc COLA for service prior to either October 1,2013 or January 10,2015,depending
on the group, provided they are retired or enrolled in DROP on or before January 1, 2021. [For members of
Groups I, III and V] Service on or after October 1, 2013 or January 10, 2015, through January 19, 2019,
depending on the group, receives a simple 2% COLA, if retired or enrolled in DROP on or before January 1,
2021.Ad-hoc COLAs are compound and granted if the amortization period required to pay-off the unfunded
liability is 28.0 years or less.If the amortization period falls between 24.1 -28.0 years to pay off the unfunded
liability the member will receive a 2%COLA,if the amortization period falls between 18.1-24.0 years the COLA
is 3%and an amortization period below 18 years pays a 4%COLA.Members who are eligible to receive a COLA,
are granted that COLA on January 1 of that year.The member must be retired by September 30 of the preceding
year(or in DROP)in order to be eligible.For members of Groups I,III and V who are not retired or enrolled in
DROP on or before January 1,2021,there is a Variable COLA or 13th check that applies to service prior to July
19,2019 which is subject to actuarial conditions and approval by the Fund Board of Trustees and City Council.
Groups II,IV and VI are not eligible for a COLA.There is no COLA for service after July 19,2019 for any Group.
Deferred Retirement Option Program
If a member continues to work after the normal retirement date,the member is required to make contributions
to the Fund until the date of actual retirement.Members continue to accrue credited service until they retire
unless they are enrolled in the Deferred Retirement Option Program(DROP).A member who has attained the
normal or special retirement date may elect to remain in active service with the City and defer retirement by
participating in the DROP.The DROP allows a member to accrue a monthly amount,into a notional account that
does not earn interest, equal to what they would have received if they had retired. Retirement benefits are
calculated at the DROP entry date and service and compensation beyond that date do not accrue to the benefit
calculation but contributions on wages continue.The DROP account is payable when service ends and the only
14
changes to the benefit upon the DROP exit are credit for unused applicable leave and eligible COLA increases.
DROP is limited to 72 months.
In September 2007,the Board voted to allow members that have entered the DROP to leave a part or all of their
DROP balance with the Fund.Members that elect this option are credited the same earnings as the Fund on a
monthly basis and are subject to losses if the Plan incurs negative earnings on Fund assets.
DROP balances for all active and inactive City Plan participants totaled$154.2 million for fiscal year end 2021
and$130.2 million for fiscal year end 2020.
Cash Balance
General City employees hired after July 1, 2011 will not have overtime in their high five salary calculation.
Alternatively,their contributions from overtime are placed in a cash balance account and the City pays 100%
matching dollars plus interest at retirement. However, as of October 1, 2013,the cash balance plan is closed
and no new contributions will be added to existing account balances.
Death and Disability Benefits
Upon the death of a retired member in Group I, III or V,the surviving spouse shall receive a monthly pension
equal to 75%of the amount being paid to the retired member.If a vested member dies before retirement,the
surviving spouse shall receive a monthly pension equal to 75% of the member's accrued pension, subject to
certain minimum benefits. Active employees who become totally disabled while in the line of duty receive
annual disability benefits that are equal to normal retirement benefits that would have accrued had the
member worked to their normal retirement date.Members who become totally disabled while not in the line
of duty receive disability benefits that are equal to retirement benefits that have accumulated as of the time
they become disabled, provided the member was vested. Non-vested members who become totally disabled
while not in the line of duty receive a refund of contributions,plus interest.
Groups II, IV,VI and unmarried members of any group have no joint survivorship benefit,they only have the
designated beneficiary actuarially neutral option. Any member may elect to have a designated beneficiary
survivor benefit at 25%, 50%, 75% or 100% by reducing their current benefit, making the cost to the plan
actuarially neutral.
Obligation to Contribute to the Fund
Effective the first payroll of fiscal year 2011, the City contributed to the Fund an amount equal to 19.74%
(20.46%for sworn police officers)of the salaries of members.Effective the first payroll of calendar year 2019,
the City shall contribute to the Fund an amount equal to 24.24% (24.96% for sworn police officers) of the
salaries of members. The City Council, through its budget appropriation, has the right to contribute an
additional amount over and above the members'contributions.
Prior to July 19,2019,employees of the City,as a condition of their employment,commencing on the effective
date of their membership in the Fund, contributed 8.25% (8.73%for sworn police officers) of their salary to
the Fund. Beginning July 19, 2019, as a condition of employment, commencing on the effective date of their
membership in the Fund, employees of the City, shall contribute 9.35% for General Employees, 10.05% for
sworn fire fighters and 10.53% for sworn police officers of their salary to the Fund. In addition, General
employees with service prior to October 1, 2013 pay an additional 0.7% of their salary to the Fund for the
length of that service until the date of their actual retirement or earlier termination of employment.Beginning
with the first pay day after January 1, 2020, employees of the City, shall contribute 9.35% for General
Employees,12.05%for sworn fire fighters and 12.53%for sworn police officers of their salary to the Fund.In
addition,General employees with service prior to October 1,2013 pay an additional 0.7%of their salary to the
Fund for the length of that service.Beginning with the first pay day after January 1,2021,employees of the City,
15
shall contribute 9.35% for General Employees, 12.05% for sworn fire fighters and 13.13% for sworn police
officers of their salary to the Fund.In addition,General employees with service prior to October 1,2013 pay an
additional 0.7% of their salary to the Fund for the length of that service. The employer and employee
contribution rates are not used when the actuary determines the annual required contributions to the Fund.
Note 2. Summary of Significant Accounting Policies
The following are the significant accounting policies followed by the Fund:
Basis of Accounting
The Fund's financial statements are prepared using the accrual basis of accounting in accordance with the
standards of the Governmental Accounting Standards Board for pension trust funds. Employer and employee
contributions are recognized when due,pursuant to formal commitments as well as statutory or contractual
requirements. Benefits and refunds of the plan are recognized when due and payable in accordance with the
terms of the plan.Purchases and sales of investments are recorded on a trade-date basis.
Cash and Cash Equivalents
For cash deposits and cash equivalents,the custodial credit risk is the risk that in the event of a bank failure,
the Fund's deposits may not be returned.The Fund's deposits are held by Northern Trust and Frost Bank.As of
September 30,2021,and 2020,the Fund had bank balances of$107,585 and$159,222,respectively, that are
in demand accounts subject to coverage by Federal Deposit Insurance Corporation (FDIC) but are not
collateralized.The Fund does not have a deposit policy for custodial credit risk,however,management believes
that the Fund's custodial credit risk exposure is mitigated by the financial strength of the banking institutions
in which the deposits are held.
Property and Equipment
Property and equipment is reported on the cost basis.The Fund provides for depreciation on the straight-line
method over the estimated useful lives of the assets.
The following estimated useful lives are used in providing for depreciation:
Building 40 years
Furniture and Equipment 5-7 years
Investment Policy Statement
The Board of Trustees (The Board)of the Fort Worth Employees'Retirement Fund(The Fund)has adopted an
Investment Policy Statement as a framework for the investment of the Fund's assets. The authority to amend
that statement rests entirely with the Board. The Investment Policy Statement was amended by the Board on
January 27,2021.A copy of the Investment Policy Statement can be found in its entirety on the Fund's website.
Valuation of Investments
Investments are stated at fair value. When available, quoted market prices are used to value investments.
Investments that do not have quoted market prices are priced from information received from the external
manager.In these cases,external managers are independent investment managers that manage assets that are
not held directly by the Fund. Examples of these kinds of investments are pooled real estate funds, pooled
private equity investments and hedge funds.These assets are pooled and managed on behalf of a number of
investors.
16
The underlying partnerships allow for withdrawals at various times during the year as provided for by the
respective underlying agreements,which may include an initial lockup period,or be subject to a gate provision
or suspension of redemptions.
The Fund utilizes a variety of financial instruments in their trading strategies,which contain varying degrees
of off-balance sheet risk. However, due to the nature of the Fund's investments, such risks are limited to the
Fund's capital balance in each underlying partnership. Below is a listing and description of the various
investments used by the Fund:
• Broad US Equity: Equity securities listed on a recognized US securities exchange or quoted on the
NASDAQ National Market System are priced at the regular trading session's closing price on the
exchange or system in which such securities are principally traded. Securities not traded on the
valuation date are priced at the most recent quoted bid price.
• Broad International Equity: Global securities' prices are based upon primary local market
quotations.Depending upon local convention or regulation,the price may represent the last sale price
or the mean between the last bid and ask price at the close of the appropriate exchange or at other
designated times as determined by the appropriate governing body.
• Fixed Income-Bank Loans:Bank Debt and Syndicated loans that are traded in the secondary market
will be priced using a pricing vendor quote,or if unavailable,a broker quote as directed by the client
or delegate.Structured loans which are bi-lateral or multi-lateral agreements between the lender and
the borrower will be priced at a level to be determined by the investment manager and approved by
the Fund. Based on information available to the investment manager, the Fund will rely on the
investment manager to indicate the current value of the loan/debt.
• Fixed Income -Government/Corporate Bonds: These securities are priced by a pricing vendor on
the basis of bid or mid evaluations in accordance to a region's market convention,using factors which
include but are not limited to market quotations, yields, maturities, and the bond's terms and
conditions.The pricing vendors use proprietary methods to arrive at the evaluated price.These prices
represent the price a dealer would pay for a security(typically in an institutional round lot).
• Real Estate, Absolute Return, Private Equity, Real Return: The Fund's investments in limited
partnerships are valued at estimated fair value based on the Fund's proportionate share of the
partnerships' fair value as recorded by the partnership. The Fund uses information provided by the
limited partnership, such as audited financial statements, periodic information on the holdings and
activities and periodic statements of fair value of the limited partnership and other information
accumulated by management pertinent to the investment to estimate fair value. The limited
partnerships allocate gains,losses and expenses to the partners based on the ownership percentage
as described in the partnership agreements. It is the Fund's policy to use the most recent available
valuation, adjusting for cash flows as necessary up until the period is closed. The closing date is
consistent each year. Estimates are used by management in determining the fair value of the Fund's
investments in limited partnerships. The amount received upon sale of the investments may differ
significantly from the recorded amount.
There are certain market risks, credit risks, foreign exchange currency risks, or events that may subject the
Fund's investment portfolio to economic changes occurring in certain industries,sectors,or geographies.
Net investment income includes net appreciation in the fair value of investments, interest income, dividend
income,and investment expenses.Investment expense includes custodian and management fees,and all other
significant investment-related costs.
17
Rate of Return
The Fund uses two approaches for calculating investment returns for reporting purposes.For the fiscal years
ended September 30,2021 and 2020,the annual money-weighted return on the Fund assets,net of investment
expenses, was 22.52% and 4.79%, respectively. The money-weighted return expresses investment
performance,net of investment expenses,adjusted for the changing amounts actually invested.In addition,for
the fiscal years ended September 30,2021 and 2020,the time-weighted return on Fund assets net of fees was
22.44%and 4.86%,respectively.The time-weighted rate of return is defined as the compounded growth rate
of$1 over the period being measured and is not sensitive to contributions or withdrawals.
Interest and Dividends Receivable and Due to/from Broker
Interest income is recorded on an accrual basis. Dividends are recorded on the ex-dividend date. Recording
activity in such a manner, results in interest and dividends receivable. The balance due to broker securities
purchased and due from broker securities sold represents trades pending settlement and amounts due to
foreign currency contracts.
Foreign Currency Transactions
The Fund is a party to financial instruments with off balance sheet risk, primarily foreign currency forward
contracts. Forward transactions are contracts or agreements for delayed delivery of commodities,securities,
or money market instruments in which the seller agrees to make delivery at a specified future date of a specified
commodity or instrument,at a specified price or yield. Entering into these investments involves not only the
risk of dealing with counterparties and their ability to meet the terms of the contracts, but also the risk
associated with market fluctuations.
Gains and losses resulting from foreign exchange contracts(transactions denominated in a currency other than
the Fund's functional currency-US dollars) are recorded by the Fund based on changes in fair values and are
combined with similar transactions in the accompanying combined statements of changes in fiduciary net
position and are included in net investment income.The Fund structures its foreign exchange contracts and
enters into certain transactions to substantially mitigate the Fund's exposure to fluctuations in foreign
exchange rates.
Investment and broker accounts denominated in foreign currencies outstanding at September 30, 2021 and
2020 were converted to the Fund's functional currency at the foreign exchange rates quoted at September 30,
2021 and 2020. These foreign exchange gains and losses are included in net appreciation in fair value of
investments in the accompanying combined statements of changes in fiduciary net position.
Use of Estimates
The preparation of financial statements and required supplementary information in accordance with
accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of net positions, and changes therein; the net
pension liability at the date of the financial statements, and changes therein.Actual results could differ from
those estimates.
The Plan invests in various investment securities.Investment securities are exposed to various risks,such as
interest rate,market,and credit risks.Due to the level of risk associated with certain investment securities,it
is at least reasonably possible that changes in the values of investment securities will occur in the near term
and that such change could materially affect the amounts reported in the combined statement of fiduciary net
position.
The net pension liability is reported based on certain assumptions pertaining to interest rates,inflation rates,
and employee demographics,all of which are subject to change.Due to uncertainties inherent in the estimations
18
and assumptions process,it is at least reasonably possible that changes in these estimates and assumptions in
the near term would be material to the financial statements.
Expenses
The Fund staff is responsible for providing or contracting with vendors to provide all administrative functions
necessary for operation of the Fund.The Board approves an annual budget for the administration of the Fund
and these expenses are paid from current Fund assets.
Multiple Employer Agent Plan
The financial statements are prepared as a multiple employer agent plan. Assets are commingled for
investment purposes. Financial statements are presented with combined information for each employer.
Required supplemental information is also presented for each employer.
Note 3. Net Pension Liability
The net pension liability is measured using the total pension liability less the pension plan's fiduciary net
position.The total pension liability as of September 30 is based on the results of the actuarial valuation dated
December 31 and rolled forward using generally accepted actuarial procedures.The total pension liability for
the City Plan is calculated using the long-term expected rate of return.
For the City Plan,the net position was projected to be available to make all projected future benefit payments
of current plan members. The long-term expected rate of return on Retirement Fund investments, with
adjustment to account for administrative expenses, was applied to the projected benefit payments. The
following table reflects the Net Pension Liability for the City Plan:
Schedule of Net Pension Liability
Years Ended September 30
Net Pension
Fiscal Plan Net Position Liability
Year as a Percent of as a Percent
Ending Total Pension Net Pension Total Pension Covered of Covered
09/30 Liability Plan Net Position Liability Liability Payroll Payroll
2014 $ 3,610,674,395 $ 2,081,575,247 $ 1,529,099,148 57.65% $391,216,461 390.86%
2015 4,127,343,024 2,003,269,563 2,124,073,461 48.54% 404,507,497 525.10%
2016 5,318,307,112 2,097,716,741 3,220,590,371 39.44% 424,371,512 758.91%
2017 5,354,699,800 2,270,521,836 3,084,177,964 42.40% 447,488,158 689.22%
2018 5,422,613,892 2,324,335,575 3,098,278,317 42.86% 467,754,197 662.37%
2019 4,571,921,160 2,312,863,285 2,259,057,875 50.59% 484,410,754 466.35%
2020 4,728,026,182 2,368,160,670 2,359,865,512 50.09% 509,575,065 463.10%
2021 4,892,874,650 2,830,439,044 2,062,435,606 57.85% 523,064,436 394.30%
19
For the Staff Plan,the net position was projected to be available to make all projected future benefit payments
of current plan members. The long-term expected rate of return on Retirement Fund investments, with
adjustment to account for administrative expenses, was applied to the projected benefit payments. The
following table reflects the Net Pension Liability for the Staff Plan:
Schedule of Net Pension Liability
Years Ended September 30
Net Pension
Fiscal Plan Net Position Liability
Year as a Percent of as a Percent
Ending Total Pension Net Pension Total Pension Covered of Covered
09/30 Liability Plan Net Position Liability Liability Payroll Payroll
2014 $ 4,156,464 $ 2,772,401 $ 1,384,063 66.70% $ 1,432,884 96.59%
2015 4,130,487 3,088,220 1,042,267 74.77% 1,539,199 67.71%
2016 5,218,030 3,715,866 1,502,164 71.21% 1,587,554 94.62%
2017 5,697,981 4,526,754 1,171,227 79.44% 1,507,141 77.71%
2018 6,648,357 5,167,655 1,480,702 77.73% 1,588,685 93.20%
2019 8,038,352 5,456,426 2,581,926 67.88% 1,533,139 168.41%
2020 9,062,509 6,003,025 3,059,484 66.24% 1,510,527 202.54%
2021 9,966,499 8,019,569 1,946,930 80.47% 2,061,061 94.46%
Actuarial Methods and Assumptions
Actuarial valuations involve projections of benefit payments, contributions, and other amounts decades into
the future.These projections are based on actuarial assumptions and methods adopted by the Fund's Board of
Trustees. Assumptions such as salary increases, investment rates of return, retirement and disability rates,
mortality, and inflation are compared against actual experience by actuarial experience studies conducted
every three years.These studies assist the Fund's Board in evaluating the accuracy with which the assumptions
predict actual experience.A three-year experience study was completed in the first quarter of 2019 for the
period January 1,2016 through December 31,2018. The experience study will be updated in the first quarter
of 2022 for the period January 1,2019 through December 31, 2021.
20
Schedule of Significant Actuarial Assumptions
As of December 31,2020
Actuarial Cost Method Entry Age Normal Entry Age Normal
Amortization Method Level Percentage of Payroll, 30-year Leveled Dollar,Layered
closed beginning in 2018
Remaining Amortization Period 28 years 30 years for new layers
Asset Valuation Method Five-year smoothed market Five-year smoothed market
Inflation 2.50% 2.50%
Salary Increases 3.25%-28.25% 2.75%-5.35%
Investment Rate of Return 7.00% 7.00%
Retirement Age Experience-based table of rates based Experience-based table of rates based
on job classification and number of on job classification and number of
years since first retirement eligibility. years since first retirement eligibility.
Mortality PubG-2010 Mortality Tables for PubG-2010 Mortality Tables.
General Employees and PubS-2010 Generational mortality improvements
Healthy Retiree Mortality Table for from the year 2010 using the ultimate
Police Officers and Firefighters. mortality improvements rates in the
Generational mortality improvements 2014-2019 MP tables.
from the year 2010 using the ultimate
mortality improvements rates in the
2014-2019 MP tables.
Cost-of-Living Adjustment A 2%cost-of-living adjustment 4.0%COLAs are assumed for
(COLA)is assumed for all members in members participating in the Ad-Hoc
the guaranteed COLA program. No COLA program.
COLAs are assumed for members with
a variable COLA. Timing of
conditional Ad-Hoc COLAs is based on
an open group projection.
21
Expected Return Arithmetic Basis
The long-term expected rate of return on pension plan investments was determined using a building-block
method in which best-estimate ranges of expected future real rates of return(expected returns,net of pension
plan investment expense and inflation) are developed for each major asset class.These ranges are combined
to produce the long-term expected rate of return by weighting the expected future real rates of return by the
target asset allocation percentage and by adding expected inflation.Best estimates of arithmetic real rates of
return for each major asset class included in the pension plan's target asset allocation as of September 30,2021
and 2020 are summarized in the following tables:
Target Asset Allocation and Arithmetic Real Rate of Return
As of September 30
2021 2020
Long-Term Long-Term
Expected Real Expected Real
Target Rate Target Rate
Asset Class Allocation of Return Allocation of Return
Global Equity M= 45.00% 6.81% ❑ 40.33% 6.81%
Fixed Income 19.00% 1.51% ❑ 18.78% 1.51%
Real Return 2.00% 5.25% 2.80% 5.25%
Real Estate M 8.00% 4.88% ❑ 11.80% 4.88%
Absolute Return 11 10.00% 2.61% ❑ 15.39% 2.61%
Private Equity ❑ 15.00% 8.00% ❑ 9.90% 8.00%
Cash 1.00% -0.50% 1.00% -0.50%
Total 100.00% 100.00%
Sensitivity of Net Pension Liability
The following tables present the net pension liability of the City Plan and the Staff Plan using their respective
discount rates in 2021 and 2020,plus or minus 1%.
The City Plan and the Staff Plan were calculated using the expected rate return of 7.00%,as well as what the
net pension liability would be if it were calculated using a discount rate that is one percentage-point lower
6.00%or one percentage-point higher 8.00%than the current rate.
Fort Worth Employees'Retirement Fund
Sensitivity of the Net Pension Liability to Changes in Discount Rate
Years Ended September 30
City Plan Staff Plan
Net Pension Liability 2021 2020 2021 2020
1%Decrease 6.00% $ 2,662,326,996 $ 2,945,537,236 $ 3,431,426 $ 4,434,976
Discount Rate 7.00% 2,062,435,606 2,359,865,512 1,946,930 3,059,484
1%Increase 8.00% 1,564,823,142 1,874,613,297 732,800 1,935,798
22
Note 4. Fair Value Measurement (GASB 72)
The Fund categorizes its fair value measurements within the fair value hierarchy established by generally
accepted accounting principles.The three levels of the fair value hierarchy are based on the valuation inputs
used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical
assets.Level 2 inputs are quoted prices for similar instruments in active markets; quoted prices for identical
or similar instruments in markets that are not active; and model-derived valuations in which all significant
inputs are observable.Level 3 valuations are derived from valuation techniques in which significant inputs are
unobservable.
Investments that are measured at fair value using the net asset value per share(or its equivalent)as a practical
expedient are not classified in the fair value hierarchy.
Investments that use inputs that are of different levels are categorized based on the lowest level of input used
to determine the fair value of the investment.
Equity investments that are classified as Level 1 are valued using prices quoted in active markets for those
securities.Level 1 debt securities are US Treasuries.Commingled debt funds that are publicly traded are also
included in Level 1.
Debt and derivative securities classified as Level 2 are valued using either a bid evaluation or a matrix pricing
technique.Bid evaluations may include market quotations,yields,maturities,call features and ratings.Matrix
pricing is used to value securities based on the securities relationship to benchmark quoted prices.These debt
and derivative securities have non-proprietary information that was readily available to market participants,
from independent sources,which are known to be actively involved in the market.Cash and cash equivalents
are short-term investments valued based on cost and accrued interest which approximates fair value.Equity
securities classified as Level 2 are derived from associated traded security values or convertible securities
valued similar to debt securities through a bid evaluation process.
Debt and derivative securities classified in Level 3 are valued similar to Level 2 securities but have limited bids,
limited trade information,limited trade activity,pricing from multiple sources but differences in prices above
an acceptable level or pricing provided by a single source. Equity securities classified as Level 3 have limited
trade information.These securities are priced off last trade price or estimated off recent trades and corporate
actions.
Assets listed in the Investments Measured at NAV (Net Asset Value) table are invested with managers in
structures that the Fund receives values for shares held in the investment structure with the manager. The
liquidity of these structures is listed in the table.
Equity Investments - This consists of two Commingled Global Equity Funds that are passive institutional
investment funds that invest in global equities diversified across all sectors focused on large to mid-cap
equities. One of the global equity funds is based on a cap weighted MSCI ACWI index and the second fund is
based on an MSCI ACWI weighted toward fundamental aspects of companies within the index.There is also one
active Commingled Emerging Market Equity Fund that is an institutional investment fund that invests in
emerging market equities diversified across all sectors focused on large to mid-cap equities.
Absolute Return Funds-This category consists of several different styles of funds as well as different liquidity
structures. When redeeming from these funds, there is typically a notice period ranging from one to three
months'notice and funds can hold back a small portion of the assets until an annual audit is conducted.In some
cases mangers designate particular investments as longer hold periods than the funds liquidity schedule, in
23
these cases they side pocket the investment,and these assets are not available immediately upon redemption.
Directional funds include an investment in one fund that invests in a directional nature based on their views of
markets,at times this fund may invest without a directional bias.The directional fund is able to be redeemed
on a quarterly basis. Equity Long/Short funds include investments in four funds with two of these funds
currently in redemption consisting of less than 1%of assets in this category.Equity long/short funds maintain
some level of market exposure by investing in US or global equities both long and short with the level of
exposure varying over time. One fund of this type, consisting of 47% of assets in this category allows a full
redemption on a quarterly basis. The other significant fund of this type, consisting of 53% of assets in this
category,allows quarterly liquidity receiving 1/4 of assets each subsequent quarter.Event driven funds include
investments in seven funds with two of those funds currently in redemption consisting of less than 1%of assets
in this category. These funds seek to gain an advantage from pricing inefficiencies that may arise based on
corporate actions or events which may change the nature of the underlying investment. The nature of event
driven investments often restricts the liquidity of those investments. In this category 16% of the assets may
only be redeemed in three-year intervals,while 14%may only be redeemed on an annual basis.The remaining
70%of assets may be redeemed quarterly receiving 1/4 of assets each subsequent quarter.Multi-Strategy funds
invest in multiple strategies in order to diversify risks and reduce volatility. The five Funds in this category
have been redeemed with the remaining assets either audit holdback or side pocketed assets waiting for
liquidation. Relative Value funds include investments in two funds in this category. Relative Value funds seek
returns by identifying mispricing of related securities or financial instruments.Both of the Relative Value funds
allows quarterly liquidity receiving 1/4 of assets each subsequent quarter.
Alternative Assets-This category consists of limited partnership structures that invest in companies or real
estate which allow for limited or no liquidity for the investor.Private Equity partnerships consists of funds that
invest in buyouts,growth equity,venture capital,special situations,mezzanine and distressed debt.There are
85 partnerships in this category and these partnerships are typically structured with a life from 7-12 years and
are considered illiquid.As investments are sold out of the partnerships,assets are returned to the investors.
These funds'fair value are determined using net asset values one quarter in arears and adjusted for cash flows
of the most recent quarter. There are three investments in Real Estate - Core partnerships which invest in
highly leased lower leverage properties that provide consistent income to the investors. These funds allow
quarterly liquidity to the investors.A redemption has been submitted from one of these managers,however a
gate has been implemented by the manager restricting the flow of redemption proceeds as the manager
pursues liquidation of some of the fund assets to meet the investors that have requested redemptions. Real
Estate-Non-Core partnerships invest in properties that require some kind of development or improvements
to improve the position of the property.There are 23 partnerships in this category and these partnerships are
typically structured with a life from 7-12 years and are considered illiquid.As properties are sold out of the
partnership,assets are returned to the investors.These funds fair value are determined using net asset values
one quarter in arears and adjusted for cash flows of the most recent quarter.
24
Investments and Derivative Instruments Measured at Fair Value
September 30,2021
Investments by Fair Value Level Fair Value Level 1 Level 2 Level 3
Short-Term Securities $ 281,585,277 $ 27,805,264 $ 253,780,013
Debt Securities
Collateralized Debt Obligations 28,932,205 16,734,978 12,197,227
Commercial Mortgage-Backed Securities 11,813,392 8,491,226 3,322,166
Corporates 182,369,321 181,952,302 417,019
Debt Other 99,813,049 99,455,148 357,901
Municipals 7,940,994 7,487,072 453,922
Non U.S.Government 12,582,119 12,582,119
U.S.Government Agencies 90,878,711 84,852,304 6,026,407
U.S.Treasuries 131,159,625 131,159,625
Total Debt Securities 565,489,416 239,105,999 307,288,842 19,094,575
Equity Securities
Communication Services 12,902,981 12,337,596 565,385
Consumer Discretionary 50,911,295 50,911,295
Consumer Staples 21,347,033 21,347,033
Energy 36,494,442 36,494,442
Equity Other 23,953,170 23,953,170
Financials 55,982,622 55,982,622
Health Care 26,928,008 26,928,008
Industrials 58,538,664 58,538,652 12
Information Technology 40,166,531 40,166,531
Materials 18,736,114 18,736,114
Real Estate 15,920,902 15,920,902
Utilities 9,487,507 9,487,507
Total Equity Securities 371,369,269 370,803,872 565,385 12
Investments Measured at Net Asset Value
Commingled Global Equity Fund 786,854,386
Commingled Emerging Market Equity Fund 71,462,701
Absolute Return 265,551,968
Private Equity 352,737,038
Private Credit 4,724,967
Real Estate-Core 151,272,237
Real Estate -Non Core 164,381,396
Total Investments Measured at Net Asset Value 1,796,984,693
Total Investments by Fair Value Level $ 3,015,428,655 $ 637,715,135 $ 561,634,240 $ 19,094,587
Investment Derivative Instruments
Swaps $ 920,984 $ 920,984
Rights and Warrants 55,032 55,032
Options (714) (714)
FX Forwards (43,679) (43,679)
Total Investment Derivative Instruments $ 931,623 $ - $ 876,591 $ 55,032
25
Investments Measured at NAV
September 30,2021
Redemption
Unfunded Frequency Redemption
Investments Measured at Net Asset Value Fair Value Commitments (if Currently Eligible) Notice Period
Equity Investments
Commingled Global Equity Fund 786,854,386 $ Daily 1 day
Commingled Emerging Market Equity Fund 71,462,701 Daily 1 day
Total Equity Investments 858,317,087
Absolute Return
Directional 25,260,030 Quarterly 75 days
Equity Long/Short 55,391,408 Quarterly 45 days
Quarterly,Annually,3 45-90 days
Event Driven 150,107,454 years
Multi-Strategy 2,155,802 Annually,Biennial 45-90 days
Relative Value 32,637,274 Quarterly 60-90 days
Total Absolute Return Investments 265,551,968
Other Assets at Net Asset Value
Private Equity 352,737,038 126,178,098 Not eligible N/A
Private Credit 4,724,967 5,000,000 Not eligible N/A
Real Estate-Core 151,272,237 _ Quarterly 60-90 days
Real Estate-Non Core 164,381,396 77,495,172 Not eligible N/A
Total Other Assets at Net Asset Value 673,115,638 208,673,270
Total Investments Measured at Net Asset Value $ 1,796,984,693 $ 208,673,270
26
Investments and Derivative Instruments Measured at Fair Value
September 30,2020
Investments by Fair Value Level Fair Value Level 1 Level 2 Level 3
Short-Term Securities $ 182,478,259 $ 10,298,206 $ 172,180,053 $
Debt Securities
Collateralized Debt Obligations 47,109,727 - 31,493,300 15,616,427
Commercial Mortgage-Backed Securities 22,192,519 20,016,901 2,175,618
Corporates 216,250,874 215,953,787 297,087
Debt Other 88,867,319 88,866,219 1,100 -
Municipals 8,559,068 - 8,559,068 -
Non U.S.Government 14,240,134 10,729,067 3,511,067
U.S.Government Agencies 130,550,176 123,213,188 7,336,988
U.S.Treasuries 68,438,593 68,438,593 - -
Total Debt Securities 596,208,410 157,304,812 409,966,411 28,937,187
Equity Securities
Communication Services 11,865,160 11,865,160 - -
Consumer Discretionary 38,726,593 38,726,593
Consumer Staples 18,331,998 18,331,998
Energy 17,179,632 17,179,632
Equity Other 17,475,791 17,475,791
Financials 34,667,061 34,667,061
Health Care 20,122,233 20,122,233 -
Industrials 45,490,422 45,490,410 12
Information Technology 34,053,086 34,053,086 -
Materials 10,134,271 10,134,271
Real Estate 13,500,437 13,500,437
Utilities 10,911,155 10,911,155 -
Total Equity Securities 272,457,839 272,457,827 12
Investments Measured at Net Asset Value
Commingled Global Equity Fund 631,100,342
Commingled Emerging Market Equity Fund 63,182,047
Absolute Return 246,348,961
Private Equity 277,629,114
Private Credit 5,208,983
Real Estate-Core 106,678,269
Real Estate 125,638,902
Total Investments Measured at Net Asset Value 1,455,786,618
Total Investments by Fair Value Level $2,506,931,126 $ 440,060,845 $ 582,146,464 $ 28,937,199
Investment Derivative Instruments
Swaps (599,652) - (599,652) -
Rights and Warrants 32,469 32,469
Options (7,434) (5,976) (1,458)
FX Forwards 491,333 - 491,333
Total Investment Derivative Instruments $ (83,284) $ 32,469 $ (114,295) $ (1,458)
27
Investments Measured at NAV
September 30,2020
Redemption Redemption
Unfunded Frequency Notice
Investments Measured at Net Asset Value Fair Value Commitments (if Currently Eligible) Period
Equity Investments
Commingled Global Equity Fund $ 631,100,342 $ Daily 1 day
Commingled Emerging Market Equity Fund 63,182,047 Daily 1 day
Total Equity Investments 694,282,389
Absolute Return
Directional 23,633,179 Quarterly 75 days
Equity Long/Short 46,250,961 Quarterly 45 days
Event Driven 118,715,441 Quarterly,Annually, 3 45-90 days
years
Multi-Strategy 2,098,666 Annually,Biennial 45-90 days
Relative Value 55,650,714 Quarterly 60-90 days
Total Absolute Return Investments 246,348,961
Alternative Assets
Private Equity 277,629,114 115,636,022 Not eligible N/A
Private Credit 5,208,983 20,000,000 Not eligible N/A
Real Estate-Core 106,678,269 30,000,000 Quarterly 60-90 days
Real Estate 125,638,902 97,044,652 Not eligible N/A
Total Alternative Investments 515,155,268 262,680,674
Total Investments Measured at Net Asset $ 1,455,786,618 $ 262,680,674
Note S. Investments
Substantially all of the Fund's investments are held by its custodian. The Retirement Fund Board of Trustees
authorizes various external managers to manage investments within certain policies as set forth by the Board.
These policies mandate a diversified portfolio,which includes investments, either directly or in commingled
accounts,in real estate,fixed income securities,and equity securities.
Governmental Accounting Standards Board Statement No. 40 "Deposit and Investment Risk Disclosures - an
amendment to GASB Statement No. 3" (GASB 40), addresses common deposit and investment risks including
custodial credit risk, credit risk, concentration of credit risk, interest rate risk, and foreign currency risk.
Required disclosures related to these risks are presented below:
Custodial Credit Risk
Custodial credit risk is the risk that in the event of failure of the counterparty,the Fund would not be able to
recover the value of its investments. The Fund does not have a formal policy for custodial credit risk. As of
September 30, 2021 and 2020,all investments are registered in the name of the Employees' Retirement Fund
of the City of Fort Worth or in the name of the Fund's custodian,established through a master trust custodial
agreement,with the exception of investments in alternative investments and commingled funds.
28
Credit Risk of Debt Securities
Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations.The
Fund's investment policy requires that fixed income securities have a weighted average of no less than
investment grade,as rated by Moody's or Standard&Poor's (S&P). However,the policy does provide for high
yield fixed income managers to invest in securities with S&P ratings between BB+ and CCC.The policy limits
25% of a manager's portfolio to be rated CCC or lower. Unrated securities should be limited to no more than
20%of a manager's portfolio.
GASB 40 does not require disclosure of US government obligations explicitly guaranteed. The table on the
following page shows the Fund's investments as of September 30,2021 and 2020.
Credit Risk Analysis
September 30,2021 and 2020
Investment Type s S&P Rati�2021 Fair Value 2020 Fair Value
Asset and Mortgage Backed Obligations AAA $ 28,681,254 $ 21,513,992
Asset and Mortgage Backed Obligations AA 768,313 4,085,494
Asset and Mortgage Backed Obligations A 2,292,666 25,720,629
Asset and Mortgage Backed Obligations BBB 1,684,511 3,770,910
Asset and Mortgage Backed Obligations BB 956,462 1,544,960
Asset and Mortgage Backed Obligations B 940,812 2,405,692
Asset and Mortgage Backed Obligations CCC 508,944 2,650,957
Asset and Mortgage Backed Obligations NR 4,912,635 7,609,612
Total Asset and Mortgage Backed Obligations 40,745,597 69,302,246
Corporate Obligations AAA 67,767 1,339,950
Corporate Obligations AA 1,144,326 1,744,122
Corporate Obligations A 37,729,297 56,655,823
Corporate Obligations BBB 87,178,848 107,059,950
Corporate Obligations BB 28,176,823 25,155,842
Corporate Obligations B 20,011,225 14,960,307
Corporate Obligations CCC 6,822,619 7,777,768
Corporate Obligations CC 50,969 114,675
Corporate Obligations NR 1,545,348 1,443,537
Total Corporate Obligations 182,727,222 216,251,974
Government Agency Obligations AAA 91,462,877 115,562,754
Government Agency Obligations AA 5,587,529 16,808,706
Government Agency Obligations A 1,315,377 3,749,162
Government Agency Obligations BB - 212,903
Government Agency Obligations NR 453,922 2,775,719
Total Government Agency Obligations 98,819,705 139,109,244
29
Credit Risk Analysis
September 30,2021 and 2020
Investment Type S&P Rating 2021 Fair Value 2020 Fair Value
International Obligations AAA $ - $ 4,012,884
International Obligations AA 1,890,963 3,777,807
International Obligations A 1,525,554 1,472,553
International Obligations BBB 1,731,686 677,100
International Obligations BB 449,421 -
International Obligations NR 6,984,495 4,299,790
Total International Obligations 12,582,119 14,240,134
Securities Lending Collateral AAA 2,141,018 5,373,524
Securities Lending Collateral AA 28,518,426 17,279,068
Securities Lending Collateral A 121,041,486 55,911,796
Securities Lending Collateral BBB 2,788,546 2,926,266
Securities Lending Collateral NR 19,933,386 18,018,275
Total Securities Lending Collateral 174,422,862 99,508,929
Total Fixed Income Subject to Credit Risk 509,297,505 538,412,527
U.S.Treasuries (no credit risk) 131,159,625 68,438,593
Short-term Marketable Securities 107,162,415 82,969,330
Corporate Stock 442,831,970 335,639,886
Alternative Investments 623,013,973 523,978,075
Commingled Funds 1,201,963,167 957,492,715
Total Fair Value of Investments $ 3,015,428,655 $ 2,506,931,126
Concentration of Credit Risk
Concentration of credit risk is the risk of loss attributed to the magnitude of the Fund's investment in a single
issuer.The Fund's investment policy addresses concentration limits on a manager basis. As of September 30,
2 02 1,the Fund did not have any investments where the underlying assets which were registered in the Fund's
name totaled more than 5%of assets of the Fund.
30
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value
of an investment. The Fund does not have a formal investment policy that limits investment maturities as a
means of managing its exposure to fair value losses arising from changing interest rates. The maturities of
investments subject to interest rate risk are as follows:
Interest Rate Risk
September 30,2021
Investment Type Less Than 1 Year 1-5 Years 6-10 Years More Than 10 Years Total Fair Value
Asset and Mortgage $ - $ 6,284,211 $ 6,026,842 $ 28,434,544 $ 40,745,597
Corporate Obligations 4,474,069 80,572,538 72,402,173 25,278,442 182,727,222
Government Obligation: - 7,182,986 10,121 91,626,598 98,819,705
International Obligatior 6,984,495 - 2,897,663 2,699,961 12,582,119
Securities Lending Colk 174,422,862 174,422,862
U.S.Treasuries - 57,408,740 29,908,046 43,842,839 131,159,625
Total $ 185,881,426 $ 151,448,475 $ 111,244,845 $ 191,882,384 $640,457,130
Interest Rate Risk
September 30,2020
Investment Type y Less Than 1 Year 1-5 Years 6-10 Years More Than 10 Years Total Fair Value
Asset and Mortgage $ - $ 11,979,409 $ 5,891,309 $ 51,431,528 $ 69,302,246
Corporate Obligations 6,701,544 78,761,206 95,331,252 35,457,972 216,251,974
Government Obligation: 23,370,710 9,846,675 1,781,340 104,110,519 139,109,244
International Obligatior 4,801,607 3,511,067 2,420,229 3,507,231 14,240,134
Securities Lending Colk 99,508,929 - - - 99,508,929
U.S.Treasuries - 25,081,932 18,486,480 24,870,181 68,438,593
Total $ 134,382,790 $ 129,180,289 $ 123,910,610 $ 219,377,431 $606,851,120
31
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Note 6. Derivative Financial Instruments
The Fund's investment managers are permitted to invest in derivatives subject to guidelines established by the
Board. Derivatives are financial instruments that derive their value, usefulness, and marketability from an
underlying instrument which represents direct ownership of an asset or an obligation of an issuer.The Fund's
derivative positions are marked to market daily and managers may only trade with counterparties with a credit
rating of A-/A3 as defined by Standard&Poor's (S&P)and Moody's respectively.Substitution and risk control
are the only strategies permitted;speculation is strictly prohibited.Derivatives are carried as a receivable when
the fair value is positive and as a payable when the fair value is negative on the Combined Statement of
Fiduciary Net Position. Fair value is determined based on quoted market prices, if available, or based on
differences in cash flows between the fixed and variable rates in each contract as of the measurement date.
Gains and losses from derivatives are included in net investment income. The Fund was in possession of the
following types of derivatives at September 30,2021 and 2020:
Futures Contracts
A futures contract is a standardized contract between two parties to buy or sell a specified asset of standardized
quantity and quality for a price agreed upon today with delivery and payment occurring at a specified future
date, the delivery date. The contracts are negotiated at a futures exchange, which acts as an intermediary
between the two parties and to minimize the risk of default by either party.
Forward Contracts
A forward contract represents an agreement to buy or sell an underlying asset at a specified date in the future
at a specified price.Payment for the transaction is delayed until the settlement or expiration date.A forward
contract is a non-standardized contract that is tailored to each specific transaction. Forward contracts are
privately negotiated and are intended to be held until the settlement date.Currency forward contracts are used
to control currency exposure and facilitate the settlement of international security purchase and sale
transactions.
Options
Options represent or give buyers the right,but not the obligation,to buy(call)or sell(put)an asset at a preset
price over a specified period.The option's price is usually a small percentage of the underlying asset's value.As
a buyer of financial options,the Fund receives a premium at the outset of the agreement and bears the risk of
an unfavorable change in the price of the financial instrument underlying the option.As a purchaser of financial
options, the Fund pays a premium at the outset of the agreement and the counterparty bears the risk of an
unfavorable change in the price of the financial instrument underlying the option.
Rights and Warrants
A right is a special type of option that has a short market life,usually existing for no more than a few weeks.
Essentially,rights originate when corporations raise money by issuing new shares of common stock.From an
investor's perspective,a right enables a stockholder to buy shares of the new issue at a specified price,over a
specified, fairly short time period. Rights not executed by their expiration date cease to exist and become
worthless.A warrant is a long-term option that gives the holder the right to buy a certain number of shares of
stock in a certain company for a certain period of time.Like most options,warrants are found in the corporate
sector of the market. Occasionally, warrants can be used to purchase preferred stock or even bonds, but
common stock is the leading redemption vehicle.Warrants,like rights,cease to exist and become worthless if
they are not executed by their expiration date.
33
Swap Agreements
A swap is an agreement between two or more parties to exchange a sequence of cash flows over a period of
time in the future based on an underlying asset. No principal is exchanged at the beginning of the swap. The
cash flows the counterparties exchange are tied to a"notional"amount.A swap agreement specifies the time
period over which the periodic payments will be exchanged.The fair value represents the gains or losses as of
the prior marking-to-market.
The Investment Derivatives schedule that follows reports the fair value and changes in fair value and notional
amounts of derivatives outstanding as of September 30,2021 and 2020.
Investment Derivatives
As of September 30,2021 and 2020
2021 2020 Changesin
Derivative Type Notional Value Fair Value Fair Value Fair Value
Investment derivatives
Futures Contracts $ 45,035,764 $ - $ - $ -
Forward Contracts 61,845,316 (43,679) 491,333 (535,012)
Swap Agreements 56,584,637 920,984 (599,652) 1,520,636
Options 1,700,000 (714) (7,434) 6,720
Rights and Warrants 18,344 55,032 32,469 22,563
Totals $ 165,184,061 $ 931,623 $ (83,284) $ 1,014,907
Investment Derivatives
As of September 30,2020 and 2019
2020 2019 Changesin
Derivative Type Mi Notional Value Fair Value Fair Value Fair Value
Investment derivatives
Futures Contracts $ 47,866,575 $ - $ (8,547) $ 8,547
Forward Contracts 59,466,795 491,333 (181,501) 672,834
Swap Agreements 78,274,799 (599,652) (910,463) 310,811
Options 6,200,000 (7,434) (6,324) (1,110)
Rights and Warrants 18,344 32,469 89,152 (56,683)
Totals $ 191,826,513 $ (83,284) $ (1,017,683) $ 934,399
Credit Risk
The Fund is exposed to credit risk on investment derivatives that are traded over the counter and reported in
asset positions.Derivatives exposed to credit risk include currency forward contracts,rights and warrants,and
swap agreements. To minimize credit risk exposure, the Fund's managers monitor the credit ratings of the
counterparties.Should there be a counterparty failure,the Fund would be exposed to the loss of the fair value
of derivatives that are in the asset positions and any collateral provided to the counterparty,net of the effect of
applicable netting arrangements.Netting arrangements provide the Fund with a right of offset in the event of
bankruptcy or default by the counterparty. Collateral provided by the counterparty reduces the Fund's credit
risk exposure.
34
The following Credit Risk Analysis schedule discloses the counterparty credit ratings of the Fund's investment
derivatives by type, as of September 30, 2021 and 2020. These amounts represent the maximum loss that
would be recognized if all counterparties fail to perform as contracted, without respect to any collateral or
other security or netting arrangement.The schedule displays the fair value of the investments by credit rating
in increasing magnitude of risk. Investments are classified by S&P rating. If the investment does not have an
S&P rating,the Moody's rating that corresponds to the S&P rating is used.As of September 30,2021 and 2020,
the Fund's credit risk to these investments is disclosed on the following table:
Investment Derivatives
Credit Risk Analysis
September 30,2021
Derivative Typ= AA A BBB Not Rated Fair Value
Forwards Contracts $ $ - $ - $ (43,679) $ (43,679)
Swap Agreements 15,696 - 905,288 920,984
Options (714) - - (714)
Rights and Warrants - - 55,032 55,032
Total $ $ 14,982 $ - $ 916,641 $ 931,623
Investment Derivatives
Credit Risk Analysis
September 30,2020
Derivative Typf AA A BBB Not Rated Fair Value ,
Forwards Contracts $ $ $ 491,333 $ 491,333
Swap Agreements - (26,613) - (573,039) (599,652)
Options (38) - (7,396) (7,434)
Rights and Warrants - - - 32,469 32,469
Total $ - $ (26,651) $ - $ (56,633) $ (83,284)
Interest Rate Risk
The interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an
investment.Interest rate swaps are an example of an investment that has a fair value that is highly sensitive to
interest rate changes. These investments,as of September 30, 2021 and 2020,are disclosed on the following
table:
Investment Derivatives
Interest Rate Risk Analysis
September 30,2021 and 2020
2021 2020
Total Total Total Total
Derivative Type Notional Value Fair Value Notional Valu Fair Value
Interest Rate Swaps $ 56,584,637 $ 920,984 $ 78,274,799 $ (599,652)
Total $ 56,584,637 $ 920,984 $ 78,274,799 $ (599,652)
35
Foreign Currency Risk
For those forward contracts and swap agreements that are securities issued by foreign countries and foreign
businesses there is an exposure to foreign currency risk. Currency forward contracts represent foreign
exchange contracts that are used to control currency exposure and facilitate the settlement of international
security purchase and sale transactions. The net exposure column of the following schedule indicates the
Fund's net foreign currency risk related to derivatives as of September 30,2021 and 2020.
Investment Derivatives
Foreign Currency Risk Analysis
September 30,2021 and 2020
2021 2020
Forward Swap Forward Swap
Currency ja Contracts Agreements Net Exposure Contracts Agreements Net Exposure
Australian Dollar $ (7,808) $ $ (7,808) $ 2,106 $ $ 2,106
Brazilian Real (290,051) (290,051) 218,605 218,605
British Pound Sterling 119,891 193,834 313,725 165,700 (121,947) 43,753
Canadian Dollar - - - 38,020 38,020
Chilean Peso (28,541) - (28,541) - - -
Euro Currency Unit 116,283 635,824 752,107 69,349 3,202 72,551
Japanese Yen 869 (69,752) (68,883) 34,717 (258,658) (223,941)
Mexican Peso - 5,633 5,633
New Zealand Dollar 19,185 19,185
Norwegian Krone - - (16,323) (16,323)
Peruvian Solance 45,678 45,678 6,010 6,010
Russian Ruble - - - (51,669) (51,669)
Total $ (43,679) $ 759,906 $ 716,227 $ 491,333 $ (377,403) $ 113,930
All values shown in Note 6 are for the positions that the Fund holds directly.The Fund may also have an indirect
exposure to derivatives via its commingled funds and its alternative investments.The Fund owns an interest
in the commingled and alternative investment funds which in turn holds the actual positions. Indirect
exposures via these types of investments are not shown here.
Note 7. Securities Lending
The Fund is authorized to contractually lend securities to borrowers in accordance with the policy established
by the Board. The Fund is currently contracted with Northern Trust to establish, manage and administer a
securities lending program.Northern Trust facilitates lending the Fund's domestic and international equity and
fixed income securities in return for collateral consisting of cash, US government securities and irrevocable
letters of credit issued by banks independent of the borrower. As of September 30, all securities lending
collateral held is cash. At a loan's inception, the value of collateral is equal to 102% for securities of United
States issuers,and 105%in the case of securities of non-United States issuers,of the fair value of any securities
to be loaned,plus any accrued interest.
Cash collateral is to be invested in government securities, bank and corporate notes, bank certificates of
deposit, time deposits, bankers' acceptances, repurchase agreements, commercial paper and asset-backed
securities. The contract with Northern Trust specifies guidelines for allowable investments, maturities, and
diversification. The Fund does not have the ability to pledge or sell collateral securities without borrower
default.The amount of cash collateral held exceeds the value of the assets on loan at September 30,2021 and
2020.
36
The Fund earns income from fees paid by the borrowers and interest earned from investing the cash collateral.
The contract requires the custodian bank to purchase any loaned securities with collateral provided,however,
if the collateral is insufficient to cover the loss,the Fund is liable for the loss.The cash collateral received on
each loan was invested in the collateral pool at Northern Trust.Because the loans are terminable at will,their
duration generally did not match the duration of the investments made with cash collateral. In addition, the
Plan had no credit risk exposure to borrowers. As of September 30, 2021 and 2020, the value of the cash
collateral held was $174,422,862 and $99,508,929, respectively, and the value of securities out on loan at
September 30, 2021 and 2020,was $170,113,278 and$97,087,690,respectively.The Fund earned $252,910
and $448,016 net, on its securities lending activity for the fiscal years ended September 30, 2021 and 2020,
respectively.
Note 8. Tax Status
The City Plan obtained its latest determination letter on December 8, 2014, in which the Internal Revenue
Service(IRS)stated that the Fund,as then designed,was in compliance with the applicable requirements of the
Internal Revenue Code(IRC).The Staff plan obtained its latest determination letter on April 7,2017,in which
the Internal Revenue Service(IRS)stated that the Fund,as then designed,was in compliance with the applicable
requirements of the Internal Revenue Code(IRC).
No federal,state or local income taxes have been provided on the operations of the Fund since the IRS approved
the Fund determination letter to be designed and operated in compliance with the applicable requirements of
the IRC.Therefore,no provision for income taxes has been included in the Fund's financial statements.
The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund's tax returns
to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax
authority.Tax positions deemed to meet a more-likely-than-not threshold should be recorded as a tax expense
in the current year.The Board has analyzed the Fund's tax positions for all open tax years and has concluded
that,as of September 30,2021 and 2020,no provision for income taxes is required in the financial statements.
As of and during the year ended September 30, 2021 and 2020, the Fund did not have any liabilities for any
unrecognized tax positions. The Fund recognizes interest and penalties, if any, related to unrecognized tax
positions as tax expense in the statements of changes in fiduciary net position.During the year,the Fund did
not incur any tax related interest or penalties.
Note 9. Plan Termination
City Plan
While the City has not expressed any intent to discontinue its contributions,it may terminate the City Plan at
any time.In the event the City Plan terminates,the net position shall be allocated among the participants and
beneficiaries of the City Plan as follows:
• First,benefits that former employees or their beneficiaries are receiving or that employees eligible for
retirement would have been receiving had they retired
• Next,other vested benefits
• Finally,all other accrued benefits
If assets remain after the above allocations,they shall be distributed to the City.
37
Staff Plan
While the Board has not expressed any intent to discontinue its contributions,it may terminate the Staff Plan
at any time. In the event the Staff Plan terminates,the net position shall be allocated among the participants
and beneficiaries of the Staff Plan as follows:
• First,benefits that former employees or their beneficiaries are receiving or that employees eligible for
retirement would have been receiving had they retired
• Next,other vested benefits
• Finally,all other accrued benefits
If assets remain after the above allocations,they shall be distributed to the Board.
Note 10. Subsequent Events
As of the issuance of this report,there are no subsequent events to report.
38
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• •
Schedule of Changes in Net Pension Liability - City (Unaudited)
Schedule of Changes in Net Pension Liability
Years ended September 30
2014 2015 2016 2017
Total Pension Liability
Service Cost $ 92,189,100 $ 85,592,978 $ 98,173,277 $ 123,792,923
Interest 234,701,479 246,292,813 252,240,071 251,645,608
Benefit Changes 110,187,898 (1,828,408) - -
Difference Between Actual
and Expected Experience (106,951,077) (10,817,086) 4,177,731 186,853,574
Assumption Changes - 364,494,287 1,022,192,887 (327,287,818)
Benefit Payments and Refunds (161,158,600) (167,065,955) (185,819,878) (198,611,599)
Net Change in Total Pension Liability 168,968,800 516,668,629 1,190,964,088 36,392,688
Total Pension Liability-Beginning 3,441,705,595 3,610,674,395 4,127,343,024 5,318,307,112
Total Pension Liability-Ending $ 3,610,674,395 $4,127,343,024 $5,318,307,112 $ 5,354,699,800
Plan Fiduciary Net Position
Contributions-Member $ 31,929,289 $ 32,541,773 $ 33,977,411 $ 35,963,200
Contributions-Employer 78,165,049 80,820,598 84,746,991 89,408,134
Net Investment Income 159,994,300 (20,635,550) 166,305,791 250,912,773
Benefit Payments and Refunds (161,158,600) (167,065,955) (185,819,878) (198,611,599)
Administrative Expense (3,738,927) (3,823,331) (4,521,503) (4,867,413)
Other (130,935) (143,220) (241,634) -
Net Change in Plan Fiduciary Net Position $ 105,060,176 $ (78,305,685) $ 94,447,178 $ 172,805,095
Plan Fiduciary Net Position-Beginning $ 1,976,515,071 $2,081,575,247 $2,003,269,563 $ 2,097,716,741
Plan Fiduciary Net Position-Ending 2,081,575,247 2,003,269,563 2,097,716,741 2,270,521,836
Net Pension Liability Ending $ 1,529,099,148 $2,124,073,461 $3,220,590,371 $ 3,084,177,964
Plan Fiduciary Net Position as a Percentage
of the Total Pension Liability 57.65% 48.54% 39.44% 42.40%
Covered Payroll $ 391,216,461 $ 404,507,497 $ 424,371,512 $ 447,488,158
Net Pension Liability as a Percentage
of Covered Payroll 390.86% 525.10% 758.91% 689.22%
*This schedule is intended to show information for 10 years.Additional years will be displayed at they become available.
40
See Notes to Required Supplementary Information
Schedule of Changes in Net Pension Liability(continued)
Years ended September 30,
2018 2019 2020 2021
Total Pension Liability
Service Cost $ 113,947,000 $ 111,950,763 $ 70,650,037 $ 69,156,958
Interest 274,954,967 290,020,564 316,896,226 327,263,445
Benefit Changes - (1,543,331,519) -
Difference Between Actual
and Expected Experience 62,114,429 (18,487,311) (476,723) 12,410,191
Assumption Changes (165,300,608) 536,393,855 -
Benefit Payments and Refunds (217,801,696) (227,239,084) (230,964,518) (243,982,126)
Net Change in Total Pension Liability 67,914,092 (850,692,732) 156,105,022 164,848,468
Total Pension Liability-Beginning 5,354,699,800 5,422,613,892 4,571,921,160 4,728,026,182
Total Pension Liability-Ending $ 5,422,613,892 $4,571,921,160 $4,728,026,182 $ 4,892,874,650
Plan Fiduciary Net Position
Contributions-Member $ 37,618,303 $ 40,634,725 $ 56,250,684 $ 60,281,553
Contributions-Employer 93,504,064 113,109,911 124,743,976 128,046,174
Net Investment Income 145,408,403 67,729,548 110,570,539 524,024,718
Benefit Payments and Refunds (217,801,696) (227,239,084) (230,964,518) (243,982,126)
Administrative Expense (4,915,335) (5,707,390) (5,303,296) (6,091,945)
Other -
Net Change in Plan Fiduciary Net Position $ 53,813,739 $ (11,472,290) $ 55,297,385 $ 462,278,374
Plan Fiduciary Net Position-Beginning $ 2,270,521,836 $2,324,335,575 $2,312,863,285 $ 2,368,160,670
Plan Fiduciary Net Position-Ending 2,324,335,575 2,312,863,285 2,368,160,670 2,830,439,044
Net Pension Liability Ending $ 3,098,278,317 $2,259,057,875 $2,359,865,512 $ 2,062,435,606
Plan Fiduciary Net Position as a Percentage
of the Total Pension Liability 42.86% 50.59% 50.09% 57.85%
Covered Payroll $ 467,754,197 $ 484,410,754 $ 509,575,065 $ 523,064,436
Net Pension Liability as a Percentage
of Covered Payroll 662.37% 466.35% 463.10% 394.30%
*This schedule is intended to show information for 10 years.Additional years will be displayed at they become available.
41
See Notes to Required Supplementary Information
Schedule of Changes in Net Pension Liability - Staff (Unaudited)
Years ended September 30
2014 2015 2016 2017
Total Pension Liability
Service Cost $ 286,870 $ 303,626 $ 284,929 $ 252,967
Interest 252,813 337,668 335,753 422,610
Benefit Changes - - (786,759) -
Difference Between Actual and
Expected Experience 510,965 (650,524) 300,333 (159,693)
Assumption Changes - - 965,041
Benefit Payments and Refunds - (16,747) (11,754) (35,933)
Net Change in Total Pension Liability 1,050,648 (25,977) 1,087,543 479,951
Total Pension Liability-Beginning 3,105,816 4,156,464 4,130,487 5,218,030
Total Pension Liability-Ending $ 4,156,464 $4,130,487 $ 5,218,030 $ 5,697,981
Plan Fiduciary Net Position
Contributions-Member $ 296,093 $ 126,984 $ 130,973 $ 124,339
Contributions-Employer 225,536 242,270 249,881 237,224
Net Investment Income 209,544 (30,772) 286,116 500,246
Benefit Payments and Refunds - (16,747) (11,754) (35,933)
Administrative Expense (4,897) (5,702) (7,779) (14,988)
Other (172) (214) (19,791)
Net Change in Plan Fiduciary Net Position $ 726,104 $ 315,819 $ 627,646 $ 810,888
Plan Fiduciary Net Position-Beginning $ 2,046,297 $ 2,772,401 $ 3,088,220 $ 3,715,866
Plan Fiduciary Net Position-Ending 2,772,401 3,088,220 3,715,866 4,526,754
Net Pension Liability Ending $ 1,384,063 $ 1,042,267 $ 1,502,164 $ 1,171,227
Plan Fiduciary Net Position as a Percentage
of the Total Pension Liability 66.70% 74.77% 71.21% 79.44%
Covered Payroll $ 1,432,884 $ 1,539,199 $ 1,587,554 $ 1,507,141
Net Pension Liability as a Percentage
of Covered Payroll 96.59% 67.71% 94.62% 77.71%
*This schedule is intended to show information for 10 years. Additional years will be displayed as they become available.
42
See Notes to Required Supplementary Information
Schedule of Changes in the Net Pension Liability(continued)
Years ended September 30,
' 2018 2019 2020 2021
Total Pension Liability
Service Cost $ 274,978 $ 226,297 $ 293,767 $ 362,723
Interest 462,281 525,209 576,978 653,429
Benefit Changes - (588,078) - -
Difference Between Actual and
Expected Experience 229,191 279,208 332,572 68,899
Assumption Changes - 1,142,887 - -
Benefit Payments and Refunds (16,074) (195,528) (179,160) (181,061)
Net Change in Total Pension Liability 950,376 1,389,995 1,024,157 903,990
Total Pension Liability-Beginning 5,697,981 6,648,357 8,038,352 9,062,509
Total Pension Liability-Ending $ 6,648,357 $ 8,038,352 $ 9,062,509 $ 9,966,499
Plan Fiduciary Net Position
Contributions-Member $ 131,067 $ 127,207 $ 124,619 $ 328,077
Contributions-Employer 250,059 241,316 353,767 497,821
Net Investment Income 303,812 170,225 278,161 1,400,587
Benefit Payments and Refunds (16,074) (195,528) (179,160) (181,061)
Administrative Expense (27,963) (54,449) (30,788) (28,880)
Other - - -
Net Change in Plan Fiduciary Net Position $ 640,901 $ 288,771 $ 546,599 $ 2,016,544
Plan Fiduciary Net Position-Beginning $4,526,754 $ 5,167,655 $ 5,456,426 $ 6,003,025
Plan Fiduciary Net Position-Ending 5,167,655 5,456,426 6,003,025 8,019,569
Net Pension Liability Ending $ 1,480,702 $ 2,581,926 $ 3,059,484 $ 1,946,930
Plan Fiduciary Net Position as a Percentage
of the Total Pension Liability 77.73% 67.88% 66.24% 80.47%
Covered Payroll $ 1,588,685 $ 1,533,139 $ 1,510,527 $ 2,061,061
Net Pension Liability as a Percentage
of Covered Payroll 93.20% 168.41% 202.54% 94.46%
*This schedule is intended to show information for 10 years.Additional years will be displayed at they become available.
See Notes to Required Supplementary Information
43
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Schedule of Combined Money-Weighted Investment Returns
(Unaudited)
Years Ended September 30
Annual
For Years Ended Investment
9/30 Returns*
2021 22.52%
2020 4.79%
2019 2.92%
2018 6.50%
2017 12.15%
2016 8.43%
2015 -1.06%
2014 8.25%
2013 10.70%
2012 12.98%
2011 1.44%
*Annual money-weighted rate of return,net of investment fees and adjusted for the changing amounts
actually invested.The City and Staff plans are commingled for investment purposes and both plans
experience the same return.
See Notes to Required Supplementary Information
46
Notes to Required Supplementary Information
Methods and Assumptions Used in Calculations of Actuarially Determined Contributions
The actuarially determined contribution is equal to the total calculated contribution rate in the prior actuarial
valuation, minus the portion expected to be covered by employee contributions, multiplied by the covered-
employee payroll. City and member contribution rates are established by ordinance. Employer and member
contribution rates for the staff plan are established in the administrative rules.
The assumptions and methods summarized below were adopted by the Board of Trustees on May 27, 2019
based on the experience investigation that covered the three-year period from January 1, 2016 through
December 31,2018.These assumptions first applied for actuarial valuation as of December 31,2018 and the
actuarially determined contribution for fiscal year ending September 30,2019.
Valuation Date December 31,2020 December 31,2020
Actuarial Cost Method Entry Age Normal Entry Age Normal
Amortization Method Level Percentage of Payroll,30- Level Dollar,Layered
year closed beginning in 2018
Remaining Amortization Period 28 30 years for new layers
Asset Valuation Method Five-year smoothed market Five-year smoothed market
Inflation 2.50% 2.50%
Salary Increases 3.25%-28.25% 2.75%-5.35%
Investment Rate of Return 7.00% 7.00%
Discount Rate 7.00% 7.00%
Retirement Age Experience-based table of rates Experience-based table of rates
based on job classification and based on either number of years
number of years since first since first retirement eligibility or
retirement eligibility. age.
Mortality PubG-2010 Mortality Tables for PubG-2010 Mortality Table.
General Employees and PubS-2010 Generational mortality
Healthy Retiree Mortality Table improvements from the year 2010
for Police Officers and Firefighters. using the ultimate mortality
Generational mortality improvement rates in the 2014-
improvements from the year 2010 2019 MP tables.
using the ultimate mortality
improvements rates in the 2014-
gni c!MP tahlPc
Cost-of-Living Adjustment A 2%cost-of-living adjustment 4.0%COLAs are assumed for
(COLA)is assumed for all members participating in the ad-
members in the Guaranteed COLA hoc COLA program.
program, No COLAs are assumed
for members with a Variable
COLA. Timing of conditional Ad
Hoc COLAs is based on an open
group projection.
47
Valuation Date December 31,2019 December 31,2019
Actuarial Cost Method Entry Age Normal Entry Age Normal
Amortization Method Level Percentage of Payroll,30- Level Dollar,Layered,Closed
year closed beginning in 2018
Remaining Amortization Period 29 30 years
Asset Valuation Method Five-year smoothed market Five-year smoothed market
Inflation 2.50% 2.50%
Salary Increases 3.25%-28.25% 2.75%-5.35%
Investment Rate of Return 7.00% 7.00%
Discount Rate 7.00% 7.00%
Retirement Age Experience-based table of rates Experience-based table of rates
based on job classification and based on either number of years
number of years since first since first retirement eligibility or
retirement eligibility. age.
Mortality PubG-2010 Healthy Retiree PubG-2010 Healthy Retiree
Mortality Table for General Mortality Table.Generational
Employees and PubS-2010 mortality improvements from the
Healthy Retiree Mortality Table year 2010 using the ultimate
for Police Officers and Firefighters. mortality improvement rates in
Generational mortality the MP tables.
improvements from the 2010
using the ultimate mortality
improvement rates in the MP
tables.
Cost-of-Living Adjustment A 2%cost-of-living adjustment 4.0%COLAs are assumed for
(COLA)is assumed for all members participating in the ad-
members in the guaranteed COLA hoc COLA program.
program,zero COLAs are assumed
for members with a Variable
COLA. Timing of Conditional Ad
Hoc COLAs is based on an open
group projection.
48
OTHER SUPPLEMENTARY INFORMATION
.tee+ i�"'`� rn��1•�1
Trinity Trails Mural
49
Schedule of Administrative Expenses
Years Ended September 30,2021 and 2020
2021 2020
Administrative Office
Staff and Benefits $ 2,442,855 $ 1,763,596
Contributions to Retirement Fund 490,449 355,759
Due Diligence - 2,725
Medical Reviews 16,423 5,065
Insurance 152,394 148,634
Office Expense 108,502 128,925
Building Expenses 243,096 237,770
Conferences and Training 10,534 16,803
Pension Administration Hosting 284,248 173,176
Pension Administration Programming 386,056 367,692
Equipment and Supplies 100,189 56,622
Total Administrative Office 4,234,746 3,256,767
Professional Services
Actuarial Services 103,934 132,286
Accounting and Auditing 56,900 55,300
Consulting 1,335,271 1,387,731
Legal Services 174,100 178,717
Other Consulting 94,688 204,590
Total Professional Services 1,764,893 1,958,624
Total Administrative Expenses $ 5,999,639 $ 5,215,391
50
Schedule of Investment Management Fees
As of September 30
2021 2020
Domestic Fixed Income
Aberdeen Asset Management $ 382,397 $ 472,698
Garcia Hamilton 176,228 175,621
Pacific Investment Management 781,403 342,982
Total Domestic Fixed Income 1,340,028 991,301
International Fixed Income
Loomis Sayles 199,000 178,114
Total International Fixed Income 199,000 178,114
Real Estate
Hammes 121,522
Heitman Core 517,374 304,237
IPI Data Centers 16,407 -
Prologis 195,178 1,140,749
UBS Trumball 257,024 285,142
Total Real Estate 985,983 1,851,650
Domestic Equities
Frontier Capital 165 507,482
Westwood 739,715 644,401
Total Domestic Equities 739,880 1,151,883
International Equities
Franklin Templeton 819,176 642,484
Northern Trust 198,462 160,560
Wellington Horizons 626,258 489,986
William Blair 517,896 381,948
Total International Equities 2,161,792 1,674,978
51
Schedule of Investment Management Fees
As of September 30
(continued)
2021 2020
Real Return
Harvest $ 171,102 $ 168,002
Total Real Return 171,102 168,002
Alternative
Albourne America 430 417
ERF Private Equity Program (49,829) 47,841
Hamilton Lane 97,266 49,952
Total Alternative 47,867 98,210
Custody Fees
Northern Trust 536,881 404,378
Total Custody Fees 536,881 404,378
Total Investment Expenses $ 6,182,533 $ 6,518,516
52
Schedule of Professional Services
As of September 30
2021 2020
Professional Fees
Albourne America,LLC $ 400,000 $ 400,000
Aksia Chicago,LLC 99,812 105,874
Aon Hewitt Investment Consulting,Inc. 35,488
Brown,Pruitt,Wambsganss,Ferrill&Dean,PC 6,520 4,675
Cascade Investment Compliance&Verification 27,000
DLA Piper,LLP 27,578 87,539
Eide Bailly,LLP 56,900 55,300
Fox Rothchild,LLP -
Gabriel,Roeder,Smith&Company 103,934 132,286
Hamilton Lane Advisors,LLC 597,011 650,000
Ice Miller,LLP 86,195 2,930
Jackson Walker,LLP 53,807 83,573
Korn Ferry 102,090
Lynn Law,PLLC -
McElvaney Public Affairs,LLC 60,220 60,000
RVK,Inc. 238,448 231,857
Whitney Smith Company 7,468 7,012
Total Professional Fees $ 1,764,893 $ 1,958,624
53
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FORT WORTHEMPLOYEES'
L_RETIREMENT FUND
Market Overview of Fiscal Year
The 2021 Fiscal Year was just as remarkable as the 2020 Fiscal Year.The wide-spread availability of effective
vaccines allowed consumer-focused businesses to re-open in varying degrees across the globe. With
unprecedented global fiscal and monetary stimulus from the developed economies,consumers were flush with
cash and full of anticipation for a return to the pre-COVID-19 normal.The economic activity accelerated as the
infection rate slowed and economies generally remained open when new virus variants caused an increase in
the infection rate. This jump in demand drove a sharp rebound to full employment, a sustained increase in
elevated manufacturing activity,and robust activity in the services area of the economy.
Despite disruptions in activity from COVID-19 variants, the U.S. economy posted impressive year over year
growth in Real GDP of-2.30%in 4Q20,0.50%in 1Q21,12.20%in 2Q21,and 4.90%in 3Q21.Unfortunately,the
stop and start economic activity of calendar 2020 combined with the increase in the M2 Money Supply from
stimulus proved to create a global supply chain issue,as global demand accelerated.This has led to the highest
inflation that the U.S.has seen in over 30 years and inflation will remain a major driver of asset class returns
and volatility going forward.As we look forward to fiscal year 2022,the Federal Reserve has signaled a shift in
priorities away from employment and toward fighting high inflation,which should prove to be unfavorable to
investment grade fixed income securities as interest rates rise.
With respect to the investment program, the Fund made several significant changes in Fiscal Year 2021.We
revised the Investment Policy Statement(IPS),including 1)the theme-based approach to the asset allocation,
2) the strategic asset allocation targets, ranges,and benchmarks,and 3) the roles and responsibilities of the
Board, Staff, and Investment Consultants.We developed investment due diligence and monitoring processes
by installing Investment Implementation procedures.We engaged a third-party investment compliance vendor
(Cascade)and designed and implemented a compliance program to match the changes in the IPS.Staff reviewed
most of the vendor and investment management relationships, resulting in additions to the Fund's watchlist
and decisions to redeem from several managers.Near the end of the fiscal year,we hired Verus Investments to
serve as General Consultant and Aksia to serve as Alternatives Consultant. This change resulted in the
termination of the discretionary relationship with Hamilton Lane, which shifted significant investment and
operational responsibilities for the Private Equity portfolio to the investment staff.
55
With respect to returns,the Fort Worth Employees'Retirement Fund ended Fiscal Year 2021 with a balance of
$2.8 billion and posted a net one-year return of 22.44%. The one-year return exceeded the target actuarial
return of 7.0%,exceeded the return of the strategic asset allocation policy index by 1.64%,and ranked in the
32nd percentile of public pensions with assets$1 billion or greater,according to Verus.For the year,the Fund
benefitted from a 28.29% return in public equities and a 60.79% return in private equities. The diversified
opportunities portfolio returned 15.2% and the real assets portfolio returned 17.34%, both of which were
impressive, but detracted from the overall return. The core fixed income portfolio was the most significant
detractor of performance and returned-0.15%.On a relative basis,the public equity portfolio underperformed
the ACWI global stock benchmark by -1.1% on international stock returns. All other asset class portfolios
produced significant outperformance relative to benchmarks for the fiscal year.
Over longer time periods,the Fund posted a 3-year net return of 9.77%,a 5-year net return of 9.58%,a 10-year
net return of 8.65%,and a since inception net return of 8.70%.At this point,the net returns have exceeded the
policy index return over all time periods.The Fund's investment returns have benefitted significantly from high
returns in public and private equities and diversified sources of return and income from real assets and
diversified opportunities.
At the end of the Fiscal 2021,the asset allocation remained close to the strategic asset allocation and within
ranges approved by the Board.The asset allocation reflected an underweight to investment grade fixed income,
smaller underweights to public and private equity,and an overweight to real assets,diversified opportunities,
and cash.These tactical shifts away from the strategic asset allocation were relatively consistent over the year.
The underweight in fixed income and overweight to real assets was related to perceived inflation pressures in
the economy. The relatively high cash balance was largely driven by transitory changes in the investment
manager line-up and an increase in retirement activity, which was related to member incentives and plan
changes designed in the 2018 pension reform action.The remaining small underweights to public and private
equities and the overweight to diversified opportunities were a result of transitory investment activities and
the changes in the IPS strategic asset allocation.
The Fund's investment policies,procedures,goals,objectives,performance of the assets,and transaction costs
are regularly monitored in whole or in part by the Staff,Cascade,Verus,Aksia,Northern Trust,the Investment
Committee,and the Board.This includes quantitative and qualitative evaluations of vendors and investment
managers that serve the Fund.The investment performance listed above is calculated using a time-weighted
rate of return methodology net of fees and based on market values and cash flows.Staff utilizes a monitoring
process to compare the performance of individual managers to relevant benchmarks,the performance reports
of the custodian, and the performance reports of the investment consultants. To the best of our knowledge,
these performance statements are accurate and reliable.
Prepared by Derrick Dagnan,Chief Investment Officer
56
Investment Summary
As of September 30,2021
9/30/2021 Fair Value
Asset Class Fair Value %
Equities $ 1,210,793,304 40.89%
Global Equities 676,396,159
Domestic Small Cap 105,267,697
Domestic Large Cap 110,458,983
International Developed 109,016,618
International Small Cap 115,909,969
Emerging Markets 93,743,878
Fixed Income 540,575,694 22.59%
Core 91,814,236
Core Plus 351,237,488
High Yield 51,787,649
Emerging Markets 45,736,321
Alternative Investments 940,778,466 32.33%
Real Estate 316,770,428
Opportunistic Credit 4,724,967
Private Equity 353,731,103
Absolute Return 265,551,968
Real Return 82,880,794 2.66%
MLPs 28,948,654
Real Assets 53,932,140
Cash Equivalents 48,904,287 1.53%
Total Asset Allocation $ 2,823,932,545 100.00%
Reconciling Items to Statement of Net Position
Accrued Income $ (5,699,733)
Broker Receivables (155,072,129)
Broker Payables 177,845,110
Securities Lending Collateral 174,422,862
Total Investments Statement of Net Position $ 3,015,428,655
57
Schedule of Asset Allocations and Returns
September 30, 2021
Long-Term
Allocation Actual
Asset Class Target Allocation Investment Performance(%)*
1 Yr 3 Yr 5 Yr
Global Equity 45.00% 42.88% 28.29 10.55 11.70
MSCI ACWI Index 27.44 12.58 13.20
Fixed Income 19.00% 19.14% 2.55 6.33 4.05
Barclays US Aggregate Index (0.90) 5.36 2.94
Barclays Global Aggregate Index (0.91) 4.24 1.99
Absolute Return 10.00% 9.40% 17.93 6.22 6.67
HFRI Fund of Funds Composite 14.29 6.49 5.80
Real Return 2.00% 2.93% 31.69 1.79 2.52
NFI-ODCE Index 13.64 6.13 6.56
Real Estate 8.00% 11.22% 13.52 8.07 7.89
NCREIF Property Index 12.15 6.72 6.84
Private Equity 15.00% 12.69% 60.02 22.08 20.91
Wilshire 5000 Index+ 3% 35.94 19.55 20.41
Cash 1.00% 1.74% 0.07 1.16 1.25
90 Day T-Bill 0.06 1.05 1.12
Total Portfolio 100.00% 100.00% 22.44 9.77 9.58
Target Allocation Index 20.80 9.40 9.22
*The basis for investment return calculations: a time weighted rate of return based on the market rate of
return.
58
Investment Managers
GLOBAL EQUITIES: ABSOLUTE RETURN: PRIVATE EQUITY[CONTINUED
Franklin Templeton Cevian Capital GI Partners
Northern Trust Contrarian Capital Management Gores Technology Group
Wellington Management Harbinger Capital Partners* Greenspring Associates
Westwood Holdings HBK Capital Management Leonard Green&Company
William Blair Indus Capital Partners Gridiron Capital
King Street Capital Hellman&Friedman
REAL RETURN: Luxor Capital Partners* HIG Capital
Harvest Fund Advisors Pentwater Capital Management High Road Capital Partners
Nuveen Perry Partners* Ignition Partners
Sculptor Capital Management* JMI Management
GLOBAL FtxED INCOME: Shepard Investments* Kelso&Company
Southpoint Capital Advisors KPS
American Century The D.E.Shaw Group KRG Capital Partners
Garcia Hamilton Wellington Management Landmark Partners
Loomis Sayles&Company Littlejohn&Co.
PIMCO *In Redemption from Manager Levine Leichtman Capital
Stone Harbor Investment Partners
Partners PRIVATE EQUITY: Madison Dearborn Partners
3i Investments
Marlin Equity Partners
REAL ESTATE: Advent International New Enterprise Associates
AEW Capital Management Altaris Health Partners Newport Global Advisors
American Landmark American Securities Newstone Capital
Ascentris Apollo Oak Hill Advisors
Campus Clarion Ascribe Capital Platinum Equity Capital
Contrarian Capital Management Avenue Capital Group Partners
Focus Healthcare Partners Bay City Capital Providence Equity Partners
Hammes Partners BC Partners The Riverside Company
Heitman Blackstone Group Scale Venture Partners
IPI Brazos Private Equity Partners Technology Crossover Ventures
Liquid Realty Partners Cerberus Capital Management TPG Capital
M&G Investments Cinven Limited TSG Capital Group
McAlister Clearlake Capital Vector Capital
New Boston Real Estate Coral Group Veritas Capital
Prologis CVC Capital Partners Vitruvian Partners
Rockspring Capital Energy Capital Partners Waterland Private Equity
SC Capital Partners Enhanced Capital Partners Welsh Carson Anderson&
Stratford Land Essex Woodlands Stowe
UBS Realty Advisors Falcon Investment Advisors Wynnchurch Capital
WestRiver Capital GF Capital Partners
59
Investment Policies Statement Summary
The Board of Trustees (Board) of the Fort Worth Employees' Retirement Fund (the Fund) has adopted an
Investment Policy Statement as a framework for the investment of the Fund's assets. The purpose of the
Investment Policy Statement is to assist the Board in effectively guiding, supervising, and monitoring the
ongoing operations and performance of the Fund.The authority to amend that statement rests solely with the
Board.The following provides a brief outline of that statement.A copy of the Investment Policy Statement in
its entirety can be found on the Fund's website.
Investment Objectives
The Fund's primary investment objective is to establish a stable,diversified investment portfolio that in the long-
term,will meet or exceed the Board approved assumed actuarial rate of return in order to maintain or improve the
funded status of the Fund and provide sufficient liquidity to timely pay benefits. The Trustees adopted the following
key investment objectives:
• The Boards' investment objective is to achieve an average long-term total rate of return which satisfies the
actuarial assumed rate of return. The target actuarial rate of return is set at 7.00%including an assumed
inflation rate of 2.50%and a target actuarial real rate of return of 4.50%.
• The Fund shall prudently manage overall risk through diversification,by establishing and updating a strategic
asset allocation using an asset allocation model that balances return expectations and risk exposures related
to institutionally investible geographies,asset classes,and investment strategies.
• The Fund shall periodically rebalance the total assets to manage active risk relative to the strategic asset
allocation and various benchmarks,as well as liquidity.Rebalancing activities shall consider both the impact
on the Fund and transaction cost of the activity.
• The investment activities of the Fund shall be executed in a cost-effective manner.
Board of Trustees
The Board is primarily responsible for establishing the long-term vision of the Fund, oversight,and adopting an
Investment Policy Statement(IPS).The IPS is intended to establish prudent investment criteria,set clear objectives,
and guide selection of the asset classes and the strategic asset allocation.Management of the Fund assets must be
done solely in the financial interest of the beneficiaries of the Fund.It also must be done in a manner consistent
with Section 802.2203 of the Texas Government Code,the Fund's Ethics Policy,the ethical guidelines of the CFA
Institute, and all applicable domestic and international securities laws, rules,and regulations.The Board,to the
extent permitted by Texas law,delegates the operational,program management,and administration of the Fund's
investment program to the Executive Director(ED)and Chief Information Officer(CIO).The Board delegates the
review and approval of the Investment Implementation Procedures (IIP) employed by the Fund staff to the
Investment Committee.At least annually, the Board reviews the actions of the ED and CIO in order to monitor
performance and compliance with the terms of delegation,the IPS,and other policies and procedures.
Investment Committee
The Investment Committee is established by the Board and is delegated the responsibility to oversee and provide
commentary and recommendations to the Board regarding investment activities,portfolio implementation,and
sustainable management of the Fund's investment processes.The Investment Committee assists in development
and provides recommendations for both the IPS and IIP.The Investment Committee reviews and provides feedback
on significant preliminary actions related to service providers. The committee also evaluates the investment
performance,including selected asset classes and external managers,in detail,using reports supplied by the
ED, CIO, investment staff, and service providers. At least annually, the Investment Committee reviews the
60
appropriateness of the investment activities delegated to the CIO, including performance of service providers,
operating expenses and budgets,asset allocation changes and the rationale for tactical asset allocation positioning.
Executive Director(ED)
The ED assumes executive responsibility and authority,as delegated,for all administrative,operational,and other
aspects of managing the Fund.The ED monitors compliance of the investment program with the IPS,the Ethics
Policy,and any laws,rules,or regulations that may apply.Additionally,the ED reviews and authorizes the use of
service providers and employment of Investment Staff. The ED further evaluates the investment performance,
processes and procedures through reports provided by the CIO,investment staff,and service providers.Finally,the
ED takes emergency,investment-related actions that are deemed essential to protect assets of the FWERF,with
such actions being promptly reported to the Executive Committee of the Board.
Chief Investment Officer(CIO)
The CIO assumes executive responsibility and authority, as delegated for the investment operations, ongoing
evaluation,and management of the assets of the Fund.The CIO ensures compliance with the IPS,IIP,and any laws,
rules,or regulations that may apply while operating ethically as a fiduciary with a duty of loyalty,investing and
managing Fund assets solely in the financial interest of members and beneficiaries. The CIO collaborates with the
ED,Investment Committee,and Board on development and implementation of investment strategies,procedures,
the IPS and IIP. The CIO establishes sourcing approaches for the efficient review, selection or termination, and
negotiation of contracts with investment related Service Providers, including but not limited to, External
Investment Managers, Discretionary External Investment Advisors, External Investment Advisors, General
Consultant,and other Service Providers related to the investment program. The CIO periodically reports to the
Board,Investment Committee,and Executive Director on administrative,organizational,investment activities,and
the outcome of fully executed decisions related to investment actions or service providers.
Compliance
The Fund's General Counsel,in consultation with the ED and CIO,shall maintain a compliance effort,which can be
performed by internal resources and/or an external service provider.The compliance function shall maintain a
degree of separation from the key investment decision-makers to effectively operate as an unbiased third-party
observer with the authority to initiate reports and recommend actions to the ED,Investment Committee and Board,
when deemed appropriate.The compliance function will maintain regulatory knowledge and assess investment
program adherence and risk related to laws, rules, and regulations. These individuals also will perform an
assessment of the Fund's compliance with relevant laws,rules,and regulations,and prepare quarterly and annual
reports documenting adherence to policies and procedures.
Asset Allocation
The Fund's asset allocation policy is intended to reflect and be consistent with the return objective and risk
tolerance expressed by the Fund.It is designed to provide the highest probability of meeting or exceeding the
Fund's long-term objectives at a level of risk acceptable to the Board.The Board and Investment Committee
have reviewed the risk,return,liquidity,and cost characteristics of a wide range of asset allocation approaches
(conservative to aggressive).Based on input from the CIO,investment staff,and General Consultant,the Board
establishes a strategic asset allocation target and acceptable asset class ranges for investment of the Total
Assets.The Board recognizes that market events or other circumstances may dictate that investing above or
below the target allocation is desired.
61
Rebalancing
Because the asset classes do not move in concert,allocation deviations will occur through normal market activity.
The CIO and investment staff should evaluate the asset classes,risk exposures,and return opportunities at least
quarterly, and rebalance the portfolio to the strategic asset allocation target or an alternative tactical asset
allocation within defined ranges.The CIO should evaluate the impact of rebalancing,along with the transaction cost
of rebalancing and any specific market or timing factors that may influence the outcome of trading activity.This
evaluation may suggest the planned rebalancing activity is undesired.
Portfolios that drift from the strategic asset allocation target and tactical asset allocation adjustments represent an
active risk compared to the strategic asset allocation target; therefore, they should be based on a specific
investment thesis or rationale that is communicated to the Investment Committee.Tactical asset allocation shifts
should remain within allowable asset class ranges.Asset class exposures that drift outside of the asset class ranges
should be rebalanced within the stated range prior to the end of a quarter.
62
Schedule of Top Ten Investments
As of September 30, 2021*
Percent
of
Name of Investment Fair Value Portfolio
Northern Trust Collective All Country World Investable $ 351,835,936 13.54%
Northern Trust COLTV ACWI Diversified Multi Factor Inde: 324,559,467 12.49%
MFB Northern Trust Collective Russell 1000 Growth Index $ 110,458,983 4.25%
William Blair Emerging Leaders Growth CIT Fund 71,462,702 2.75%
Nuveen Real Asset Income Fund R6 $ 53,929,599 2.08%
Stone Harbor Invt FDS EM Debt 45,736,321 1.76%
Heitman America Real Estate Trust LP FD $ 45,660,236 1.76%
Prologis European Properties Fund II 43,797,510 1.69%
Iguazu Investors (Cayman) LP $ 43,264,235 1.67%
Realterm Logistics Income Fund 34,754,963 1.34%
* A complete list of the Fund's holdings is available at the Fund's office by appointment.
63
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GRS
P:469.524.0000 I www.grsconsultirg.com
December 10, 2021
Board of Trustees
Employees' Retirement Fund of the City of Fort Worth
3801 Hulen Street, Suite 101
Fort Worth,TX 76107
Subject:Actuarial Valuations as of December 31, 2020
Members of the Board,
At the request of the Employees' Retirement Fund of the City of Fort Worth (FWERF), Gabriel
Roeder Smith & Company(GRS) has performed the actuarial valuations of the Employees'
Retirement Fund of the City of Fort Worth (City Plan) and the City of Fort Worth Employees'
Retirement Fund Staff Retirement Plan (Staff Plan).The information in the Actuarial Section is based
on our annual actuarial valuation reports for the two plans, with the most recent valuations
conducted as of December 31, 2020, and is intended to be used in conjunction with the full reports.
FWERF is an agent multiple-employer defined benefit pension plan covering employees of the City
of Fort Worth and employees of the Employees' Retirement Fund of the City of Fort Worth.
This letter and the schedules listed below represent GRS' certification of the funded status as
required for the financial report for the fiscal year ended September 30, 2021 for the City Plan and
the Staff Plan.
In the Financial Section, GRS prepared the following:
• Sensitivity of the Net Pension Liability to Changes in Discount Rate,
• Schedule of Changes in the Net Pension Liability, and
• Schedule of Actuarially Determined Employer Contributions.
In the Actuarial Section, GRS prepared the following:
• Executive Summary,
• Schedule of Funding Progress,
• Development of Actuarial Value of Assets,
• Actuarial Gain or Loss,
• Analysis of Normal Cost by Component,
• Retirees, Beneficiaries, and Disabled Participants Added to and Removed from Rolls,
• Solvency Test, and
• Distribution of Active Members by Age and Years of Service.
A.
67
Board of Trustees
December 10, 2021
Page 2
Data
The valuation was based upon information as of December 31, 2020, furnished by FWERF staff,
concerning system benefits, financial transactions, plan provisions and active members, terminated
members, retirees and beneficiaries. We checked for internal and year-to-year consistency, but did
not audit the data.We are not responsible for the accuracy or completeness of the information
provided by FWERF staff.
Actuarial Assumptions and Methods
The assumptions and methods applied in this actuarial valuation were adopted by the Board of
Trustees on March 27, 2019 based on the experience investigation that covered the three-year
period from January 1, 2016 through December 31, 2018. In accordance with the Administrative
Rules of FWERF, all actuarial assumptions and methodologies must be adopted by the Board upon
the advice of the actuary. We believe the assumptions for the funding valuation are internally
consistent and are reasonable, based on the actual experience of FWERF, and meet the parameters
of the Actuarial Standards of Practice issued by the Actuarial Standards Board.The actuarial
assumptions and methods used to develop the Schedules of Changes in the Net Pension Liability and
the Schedule of Actuarially Determined Employer Contributions, noted above, also meet the
parameters set forth in the disclosures presented in the Financial Section by Governmental
Accounting Standards Board Statement No. 67.
The actuarial accrued liability and corresponding normal cost rate for the City Plan are based on the
Entry Age Normal actuarial cost method where the benefits are based on the benefits payable to
each individual active member.This method was selected for funding purposes in order to provide a
more stable normal cost, and resulting actuarially determined contribution, each year.The same
actuarial cost method was selected for financial reporting purposes.
The results of the actuarial valuation are dependent upon the actuarial assumptions used.Actual
results can and almost certainly will differ, as actual experience deviates from the assumptions. Even
seemingly minor changes in the assumptions can materially change the liabilities, calculated
contribution rates and funding periods. A review of the impact of a different set of assumptions on
the funded status of the City Plan and the Staff Plan are outside the scope of this actuarial valuation.
The current actuarial assumptions are outlined in the section of the ACFR titled "Actuarial
Assumptions and Methods."
Benefits
There were no changes to the plan provisions of the City Plan and the Staff Plan during the past
year.The current benefit provisions are outlined in the section of the ACFR titled "Summary of Key
Provisions."
-_WN -
5605 North MacArthur Boulevard
68
Board of Trustees
December 10, 2021
Page 3
Funding Policy and Objectives—City Plan
As outlined in the City Code and the Funding Policy adopted by the Board, the funding objective of
the City Plan is to fund the sum of the normal cost, the assumed administrative expenses, and an
amount necessary to eliminate the UAAL over a closed 30-year period beginning on December 31,
2018 with the goal of eliminating the UAAL by December 31, 2048. Contribution rates should be
established which, over time, will remain level as a percent of payroll. As a result, the Actuarially
Determined Employer Contribution (ADEC) is based on a closed 30-year amortization of the UAAL as
of December 31, 2018 (28 years remaining as of December 31, 2020) and is being amortized as a
level percentage of payroll.This ADEC will be equal to the City's portion of the total contributions
that are necessary to meet this funding objective and this ADEC is appropriate for use by the Board
to monitor progress towards these funding goals.
The City Plan receives member contributions in accordance with the following schedule based on
Member Contributory Payroll. Effective July, 2019, Member Contributory Payroll changed to include
earnings from unscheduled overtime.
Statutory Statutory Statutory
Previous Contribution Rates Contribution Rates Contribution Rates
Contribution Rate Effective Effective Effective
July 2019 January 2020 January 2021
General Employees 8.25% 9.35% 9.35% 9.35%
Police Officers 8.73% 10.53% 12.53% 13.13%
Firefighters 8.25% 10.05% 12.05% 12.05%
Based on the current composition of the active plan population,the average member rate will be
approximately 11.14%of the Member Contributory Payroll once all of the contribution rates are
completely phased in.
Based on the current composition of the active plan population,the average City rate is
approximately 24.48%of the City Contributory Payroll.The ADEC for 2021 is 32.29% of City
Contributory Payroll, or$165.3 million, which exceeds the expected City contribution by 7.81%of
City Contributory Payroll. As a result, the stated funding objective is not being met.
City Contributory Payroll includes unscheduled overtime for Tier 1 members and does not include
unscheduled overtime for Tier 2 members.
Based on the current statutory contribution rates, the funding period on the valuation date,
excluding projected Risk-Sharing Contributions and Ad Hoc COLAs, is 74 years. Incorporating
projected Risk-Sharing Contributions and Ad Hoc COLAs, the funding period is 42 years.The funding
period incorporating the projected Risk-Sharing Contributions and Ad Hoc COLAs is the most
reasonable estimate for the time until the UAAL is eliminated.
-_WW - Im
S60S North MacArthur Boulevard I Suite 870 1 Irving,Texas 75038-2631
69
Board of Trustees
December 10, 2021
Page 4
The City Code specifically defines an actuarially determined contribution (ADC) as a contribution
"based on a closed 30-year funding of unfunded liabilities." In this context, the ADC is the sum of
the anticipated member contributions and the City contributions. Since the City and the members
contribute on a different payroll basis, it would not be accurate to add the City and member
contribution rates together. As a result, the actuarial valuation will focus on the Actuarially
Determined Employer Contribution (ADEC) for purposes of reporting required contribution rates
so it is clear which payroll basis is being considered. However,the ADEC will simply be
determined as the projected ADC less the anticipated member contributions.
The unfunded actuarial accrued liability(UAAL) of the City Plan increased from $2.19 billion as of
December 31, 2019 to $2.22 billion as of December 31, 2020. The UAAL was expected to increase
to $2.24 billion as of December 31, 2020 but the plan incurred a net experience gain of$18
million which decreased the UAAL to$2.22 billion. The primary sources of the experience
changes were a $13 million gain on the actuarial valuation of assets and a $5 million gain on
liabilities.
Additionally, the funded ratio of the City Plan—actuarial value of assets divided by the actuarial
accrued liability—increased from 52.3%to 53.2%as of December 31, 2020. The funded status is
one of many metrics used to show trends and develop future expectations about the health of a
retirement system. The funded status measure itself is not appropriate for assessing the
sufficiency of plan assets to cover the estimated cost of settling the plan's benefit obligations or
assessing the need for or the amount of future contributions since it does not reflect normal cost
contributions, the timing of amortization payments, or future experience other than expected.
Funding Policy and Objectives—Staff Plan
On August 28, 2019, the FWERF Board of Trustees adopted the current funding policy for the
Staff Plan. Under the current funding policy, the Total Funding Policy Contribution is determined
as the sum of the normal cost,the assumed administrative expenses, and a structured payment
towards eliminating the unfunded actuarial accrued liability(UAAL).
The payments to the UAAL will be based on layered amortization where each layer is based on a
30-year level-dollar amortization schedule. The Actuarially Determined Employer Contribution
(ADEC) is the Total Funding Policy Contribution minus the expected member contributions. The
current funding policy directs the employer to contribute the ADEC to the Staff Plan each year.
The Staff Plan receives member contributions of 10.50%of payroll and employer contributions
equal to the ADEC, as set by the current funding policy for the Staff Plan. The ADEC for 2021 is
$435,845. On an actuarial value of assets basis, the current funding policy should be sufficient to
first amortize the UAAL in 29 years.
—_W" — M
5605 North MacArthur Boufevard � Suite 870 1 Irving,Texas 75038-2631
70
Board of Trustees
December 10, 2021
Page 5
The unfunded actuarial accrued liability(UAAL) of the Staff Plan decreased from $2,773,532 as of
December 31, 2019 to $2,734,377 as of December 31, 2020. The funded ratio of the Staff Plan—
actuarial value of assets divided by the actuarial accrued liability—increased from 67.4%to 70.7%
as of December 31, 2020.The funded status is one of many metrics used to show trends and
develop future expectations about the health of a retirement system. The funded status measure
itself is not appropriate for assessing the sufficiency of plan assets to cover the estimated cost of
settling the plan's benefit obligations or assessing the need for or the amount of future
contributions since it does not reflect normal cost contributions, the timing of amortization
payments, or future experience other than expected.
Certification
All of our work conforms with generally accepted actuarial principles and practices, and to the
Actuarial Standards of Practice issued by the Actuarial Standards Board. In our opinion, our
calculations also comply with the requirements of, where applicable, the Governmental
Accounting Standards Board, the Internal Revenue Code and ERISA.
The signing actuaries are independent of the plan sponsor. They are each Enrolled Actuaries,
Fellows of the Society of Actuaries, and Members of the American Academy of Actuaries, and
meet the Qualification Standards of the American Academy of Actuaries. Finally, each of the
undersigned are experienced in performing valuations for large public retirement systems.
Respectfully submitted,
Gabriel, Roeder, Smith & Company
R. Ryan Falls, FSA, EA, MAAA Bill Detweiler, ASA, FCA, MAAA
Senior Consultant &Actuary Consultant
-_WN - M
5605 Nor6 MacArthur:. f 1 Irving,Texas 75038-2631
71
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Actuarial Assumptions and Methods: City Plan
The assumptions and methods applied in this actuarial valuation were adopted by the Board of Trustees
(Board) on March 27, 2019 based on the experience investigation that covered the three-year period from
January 1, 2016 through December 31, 2018. In accordance with the Administrative Rules of the Fort Worth
Employees'Retirement Fund(the Fund),all actuarial assumptions and methodologies must be adopted by the
Board upon the advice of the Actuary.
I. Valuation Date
The valuation date is December 31 of each plan year.This is the date as of which the actuarial present value
of future benefits and the actuarial value of assets are determined.
II. Actuarial Cost Method
The actuarial valuation is used to determine the adequacy of the current City contribution rate, describe
the current financial condition of the Fund, analyze changes in the condition of the Fund, and provide
various summaries of the data.
The actuarial valuation uses the Entry Age Normal (EAN) actuarial cost method. Under this method,the
first step is to determine the contribution rate (level as a percentage of pay) required to provide the
benefits to each member,or the normal cost rate.The normal cost rate consists of two pieces:the member's
contribution rate and the remaining portion of the normal cost rate which is the employer's normal cost
rate. Further,the total normal cost was determined using the"replacement life"application of EAN where
the normal cost is based on each member's current benefit structure as though it has always been in place.
The Unfunded Actuarial Accrued Liability (UAAL) is the liability for future benefits which is in excess of
the actuarial value of assets and the present value of future normal costs. The employer contribution
provided in excess of the employer normal cost is applied to amortize the UAAL.
The projected funded status and the Actuarially Determined Employer Contribution(ADEC)are calculated
based on the assumption that: (a) future market earnings,net of investment-related expenses,will equal
7.0%per year;there will be no liability gains/losses or changes in assumptions;active members who leave
employment will be replaced by new entrants each year such that the Member Contributory Payroll grows
at the same rate as the payroll growth assumption;and contributions will remain the same percentage of
payroll.
The Entry Age actuarial cost method is an"immediate gain"method (i.e.,experience gains and losses are
separately identified as part of the UAAL). However,they are amortized over the same period applied to
all other components of the UAAL.
III. Actuarial Value of Assets
The actuarial value of assets is based on the fair value of assets with a five-year phase-in of actual
investment returns in excess of(less than)expected investment income.Offsetting unrecognized gains and
losses are immediately recognized, with the shortest remaining bases recognized first and the net
remaining bases continuing to be recognized on their original timeframe.Expected investment income is
determined using the assumed investment return rate and the fair value of assets (adjusted for receipts
and disbursements during the year).In no event will this amount exceed 120%of fair value or be less than
80%of fair value.
73
IV. Actuarial Assumptions
Investment Return: 7.0%per year,net of investment-related expenses (composed of an assumed 2.5%
inflation rate and a 4.5%real rate of return).
Mortality Decrements:
Pre-retirement
PubG-2010 Employee Mortality Table for General Employees and PubS-2010 Employee Mortality
Table for Police Officers and Firefighters. Generational mortality improvements projected from the
year 2010 using the ultimate mortality improvement rates from the MP-2014 through MP-2019 tables.
Healthy Annuitants
PubG-2010 Healthy Retiree Mortality Table for General Employees and PubS-2010 Healthy Retiree
Mortality Table for Police Officers and Firefighters. Generational mortality improvements projected
from the year 2010 using the ultimate mortality improvement rates from the MP-2014 through MP-
2019 tables. The mortality for all surviving beneficiaries will be based on the PubG-2010 Healthy
Retiree Mortality Table.
Disabled Annuitants
PubG-2010 Disability Mortality Table for General Employees and PubS-2010 Disability Mortality Table
for Police Officers and Firefighters. Generational mortality improvements projected from the year
2010 using the ultimate mortality improvement rates from the MP-2014 through MP-2019 tables..
In Line of Du , Death
The percentage of pre-retirement deaths assumed to be in the line of duty are:
General Employees: 0%
Police Officers: 10%
Firefighters: 10%
Service Retirement Decrements:
Members Who Reach 80 Points Before Age 65
The following rates reflect the members expected departure from active service and are applied based
on years since first becoming eligible for Normal Retirement:
Year of General
Eligibility Employees Police Officers Firefighters
1n 30% 15% 5%
2nd 15 10 5
3rd 20 10 10
4th 25 20 10
5th 25 30 25
6th 35 5o 5o
7th 35 5o 5o
8th 35 5o 5o
9th 35 5o 5o
10th 100 100 100
74
Tier 2 General Employees who reach 80 points(age plus years of eligibility service)prior to age 55 will
have their retirement rate increased by 20%in their first year of eligibility.
All members eligible for Normal Retirement prior to January 1,2021 are assumed to enter DROP and
retain their COLA election.
Members Who Do Not Reach 80 Points Before Age 65
The following rates reflect the member's expected departure from active service and are applied based
on the member's age:
General
Age Employees Police Officers Firefighters
65-69 27.5% 100% 100%
70+ 100 100 100
Early(Reduced] Retirement
Police Officers and Firefighters have zero assumed probability of retiring prior to eligibility for Normal
(Unreduced) Retirement.The following age-based rates apply for General Employees:
General
Age Employees
50-56 1.5%
57-58 2.5
59-61 3.5
62 8.0
63-64 2.5
Deferred Retirement Option Program (DROP)
Every member who reaches Normal (Unreduced) Retirement eligibility prior to age 65 is assumed to
enter DROP, leave active service in accordance with the assumed retirement rates, and have
participated in DROP for the maximum possible period upon departure from active service.
Inactive Vested Participants
Members that terminate with a vested benefit are assumed to choose the most valuable option
available to them at the time of termination: withdrawal of contributions or deferred annuity.
Dependents of vested members that die prior to reaching Normal Retirement are assumed to elect a
withdrawal of contributions.
75
Disability Retirement Decrements:
Disability Rates
Rates for males and females at selected ages are shown below:
Age Rate
20 0.005%
25 0.006
30 0.009
35 0.013
40 0.018
45 0.027
50 0.044
55 0.076
60 0.100
In Line of Duty DisabijU
The percentage of disability retirements assumed to be in the line of duty are:
General Employees: 0%
Police Officers: 40%
Firefighters: 15%
Termination Decrements for Reasons Other Than Death or Retirement:
Withdrawal Rates
The following service-based rates apply:
Years of General
Service Employees Police Officers Firefighters
0 22.0% 7.0% 3.0%
1 15.0 2.0 0.5
2 14.0 1.8 0.5
3 11.0 1.6 0.5
4 9.0 1.5 0.5
5 1.4 0.5
6 See age-based 1.3 0.5
7 termination rates 1.2 0.5
8 after five years of 1.1 0.5
9-11 employment 1.0 0.5
12-16 1.0 0.4
17+ 0.6 0.4
76
After the first five years of employment,age-based rates apply as shown below for General Employees:
Age Rate
25-29 11.5%
30-34 7.5
35-39 6.0
40-44 5.0
45-49 4.5
50-54 3.2
55-59 2.3
60-64 2.0
All rates of termination are zero for members eligible for Normal Retirement.
Salary Increases: Increases are assumed to occur at the beginning of the valuation year and vary by
employee group. Salary increases include an underlying inflation component of 2.50% and a
productivity component of 0.75%.
Years of General
Service Employees Police Officers Firefighters
0 5.85% 28.25% 18.25%
1 5.65 18.25 15.25
2 5.45 8.25 8.25
3 5.25 8.25 9.75
4 5.05 8.25 9.75
5 4.85 5.75 5.75
6 4.65 4.50 3.25
7 4.45 4.50 3.25
8 4.25 4.50 4.75
9 4.05 4.50 4.75
10 3.85 4.50 3.25
11 3.65 4.50 3.25
12 3.45 4.50 3.25
13 3.25 4.50 4.75
14 3.25 5.75 4.75
15 3.25 5.75 3.25
16 3.25 5.75 3.25
17 3.25 5.75 3.25
18 3.25 4.50 3.25
19+ 3.25 3.25 3.25
Valuation Payroll is the expected Regular Earnings for the calendar year following the valuation date.
It is generally based on the actual pay for the prior year and increased with one year of expected salary
increase.
77
Overtime Pay: Pay for Blue Service benefits for the upcoming year is based on the Valuation Payroll
and increased by the following loads to account for unscheduled overtime pay:
General Employees: 3.50%
Police Officers: 7.00%
Firefighters: 18.00%
Average Earnings Overtime Load: Blue Service benefits are loaded by the following percentages to
account for higher than usual overtime worked during the final average earnings period:
General Employees: 0.00%
Police Officers: 2.00%
Firefighters: 6.00%
Sick Leave Service Conversions: Retirement and terminated vested benefits are loaded by the
following percentages to account for additional service accrued for unused sick and major medical
leave:
General Employees: 3.75%
Police Officers: 2.00%
Firefighters: 2.50%
Due to the elimination of future accruals of excess sick leave used toward service and FAC at
retirement,these load percentages are phased out for each individual member over a 20-year period
based on their service as of December 31,2018.
Cost-of-Living Adjustments (COLA): Members who have the Guaranteed 2%COLA are assumed to
receive a 2%increase of their base pension amount.The open group projection associated with this
valuation incorporates the provisions of the Conditional Ad-Hoc COLA and the liability associated with
future expected Conditional Ad-Hoc COLAs.
Administrative Expenses: $6,600,000 for 2021. This amount is reviewed annually based on input
from Fund staff.
Payroll Growth: Member Contributory Payroll is assumed to grow at 3.0% per year. Future City
Contributory Payroll incorporates the expected transition of the City contributing on Earnings with
Overtime for Tier 1 members to the City contributing on Regular Earnings for Tier II members.As a
result,the City Contributory Payroll is expected to increase by approximately 2.8% over the next 30
years.
Marital Assumptions: 80% of male members and 60% of female members are assumed to be
married.Male member is assumed to be four years older than female beneficiary;and female member
is assumed to be the same age as male beneficiary.
Decrement Timing: All decrements - mortality, service retirement, disability retirement, and
termination of employment for reasons other than death or retirement-are assumed to occur at the
middle of the valuation year.
78
Census Data and Assets:
• The valuation was based on members of the Fund as of December 31,2019,and does not take into
account future members.
• All census data was supplied by the Fund and was subject to reasonable consistency checks.
• There were data elements that were modified for some members as part of the valuation in order
to make the data complete.However,the number of missing data items was immaterial.
• Asset data was supplied by the Fund.
Actuarial Assumptions and Methods: Staff Plan
The assumptions and methods applied in this actuarial valuation were adopted by the Board of Trustees on
March 27,2019,based on the experience investigation that covered the three-year period from January 1,2016,
through December 31,2018.
I. Valuation Date
The valuation date is December 31 of each plan year.This is the date as of which the actuarial present value
of future benefits and the actuarial value of assets are determined.
II. Actuarial Cost Method
The actuarial valuation is used to determine the employer contribution, describe the current financial
condition of the Staff Plan, analyze changes in the condition of the Staff Plan, and provide various
summaries of the data.
The actuarial valuation uses the Entry Age Normal actuarial cost method.Under this method,the first step
is to determine the contribution rate(level as a percentage of pay)required to provide the benefits to each
member,or the normal cost rate.The normal cost rate consists of two pieces: the member's contribution
rate and the remaining portion of the normal cost rate which is the employer's normal cost rate.The total
normal cost rate is based on the plan provisions that apply to each individual member.
The Unfunded Actuarial Accrued Liability(UAAL) is the liability for future benefits which is in excess of
the actuarial value of assets and the present value of future normal costs. The employer contribution
provided in excess of the employer normal cost is applied to amortize the UAAL.
The funding period is the earliest date that the UAAL is expected to be less than or equal to zero based on
the UAAL amortization schedule.
The Entry Age actuarial cost method is an"immediate gain"method (i.e.,experience gains and losses are
separately identified as part of the UAAL). However,they are amortized over the same period applied to
all other components of the UAAL.
III. Actuarial Value of Assets
The actuarial value of assets is based on the fair value of assets with a five-year phase-in of actual
investment returns in excess of(less than)expected investment income.Offsetting unrecognized gains and
losses are immediately recognized, with the shortest remaining bases recognized first and the net
remaining bases continuing to be recognized on their original timeframe.Expected investment income is
determined using the assumed investment return rate and the fair value of assets (adjusted for receipts
79
and disbursements during the year).In no event will this amount exceed 120%of fair value or be less than
80%of fair value.
IV. Actuarial Assumptions
Investment Return: 7.0%per year, net of investment-related expenses (composed of an assumed 2.5%
inflation rate and a 4.5%real rate of return)
Mortality Decrements:
Pre-retirement
PubG-2010 Employee Mortality Table. Generational mortality improvements projected from the year
2010 using the ultimate mortality improvement rates from the MP-2014 through MP-2019 tables.
Healthy Annuitants
PubG-2010 Healthy Retiree Mortality Table. Generational mortality improvements projected from the
year 2010 using the ultimate mortality improvement rates from the MP-2014 through MP-2019 tables.
Disabled Annuitants
PubG-2010 Disability Mortality Table. Generational mortality improvements projected from the year
2010 using the ultimate mortality improvement rates from the MP-2014 through MP-2019 tables.
In Line of Due Death
0%of pre-retirement deaths are assumed to be in the line of duty.
Service Retirement Decrements:
Members Who Reach 80 Points by 65
The following rates reflect the members expected departure from active service and are applied based
on years since first becoming eligible for Normal Retirement:
Year of
Eligibility Rate
1n 30%
2nd 15
3rd 20
4th 25
5th 25
6th 35
7th 35
8th 35
9th 35
10th 100
Upon reaching age 70,all eligible members are assumed to retire even if they are less than ten years
past first eligibility for Normal Retirement.
Employees hired on or after September 30, 2019 who reach 80 points (age plus years of eligibility
service)prior to age 55 will have their retirement rate increased by 20%in their first year of eligibility.
80
Members Who Do Not Reach 80 Points by 65
The following rates reflect the member's expected departure from active service and are applied based
on the member's age:
Age Rate
65-69 27.5%
70+ 100
Early(Reduced) Retirement
Members have zero assumed probability of retiring prior to eligibility for Normal (Unreduced)
Retirement.
Deferred Retirement Option Program(DROP)
Every member who reaches Normal (Unreduced) Retirement eligibility prior to age 65 is assumed to
enter DROP, leave active service in accordance with the assumed retirement rates, and have
participated in DROP for the maximum possible period upon departure from active service.
Inactive Vested Participants
Members that terminate with a vested benefit are assumed to choose the most valuable option
available to them at the time of termination: withdrawal of contributions or deferred annuity.
Dependents of vested members that die prior to reaching Normal Retirement are assumed to elect a
withdrawal of contributions.
Disability Retirement Decrements:
Members have zero assumed probability of retirement due to disability.
Termination Decrements for Reasons Other Than Death or Retirement:
Withdrawal Rates
The following service-based rates apply:
Years of
Service Rate
0 22.0%
1 15.0
2 14.0
3 11.0
4 9.0
81
After the first five years of employment,age-based rates apply as shown below:
Age Rate
25-29 11.5%
30-34 7.5
35-39 6.0
40-44 5.0
45-49 4.5
50-54 3.2
55-59 2.3
60-64 2.0
All rates of termination are zero for members eligible for Normal Retirement.
Salary Increases:Increases are assumed to occur at the beginning of the valuation year.Salary increases
include an underlying inflation component of 2.50%and a productivity component of 0.25%.
Years of
Service Rate
0 5.35%
1 5.15
2 4.95
e3 4.75
4 4.35
5 4.35
6 4.15
7 3.95
8 3.75
9 3.55
10 3.35
11 3.15
12 2.95
13 2.75
14 2.75
15 2.75
16 2.75
17 2.75
18 2.75
19+ 2.75
82
Contributory Payroll is the expected Regular Earnings for the calendar year following the valuation date and
limited by IRC Section 401(a)(17). It is generally based on the anticipated salary for the upcoming year as
reported by ERF Staff.
Overtime Pay:Members are not assumed to receive compensation to account for unscheduled overtime pay.
Cost-of-Living Adjustments (COLA): Members who have the Conditional Ad-Hoc COLA are assumed to
receive 4%annual increases.
Administrative Expenses: $30,000 for 2021.This amount is reviewed annually.
Payroll Growth:Total payroll is assumed to grow at 2.5%per year.
Marital Assumptions: 100% of members are assumed to be married. Male member is assumed to be four
years older than female beneficiary;and female member is assumed to be the same age as male beneficiary.
Decrement Timing:All decrements -mortality,service retirement,disability retirement,and termination of
employment for reasons other than death or retirement-are assumed to occur at the middle of the valuation
year.
Census Data and Assets
• The valuation was based on members of the Staff Plan as of the valuation date and does not take into
account future members.
• All census data was supplied by Fund staff and was subject to reasonable consistency checks.
• There were data elements that were modified for some members as part of the valuation in order to
make the data complete.However,the number of missing data items was immaterial.
• Asset data was supplied by Fund staff.
83
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Analysis of Normal Cost by Component
As of December 31, 2020 and 2019
bty Plan -r- Staff Plan
2020 2019 2020 2019
Gross Normal Cost
Retirement Benefits 12.97% 12.93% 14.68% 14.34%
Termination Benefits 2.71% 2.72% 5.73% 5.86%
Death Benefits 0.19% 0.19% 0.21% 0.18%
Disability Benefits 0.08% 0.08% 0.00% 0.00%
Totals 15.95% 15.92% 20.62% 20.38%
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Historical Active Participant Data
' Activ Average Average Covered Average Percent
Valuation Date a Age Service Payroll* Salary Change
1/1/2012 6,281 43.9 10.9 383.802 61,105 2.1%
1/1/2013 6,278 44.3 11.2 375.688 61,204 0.2%
1/1/2014 6,199 44.5 11.4 373.848 60,308 -1.5%
12/31/2014** 6,198 44.6 11.4 389.528 62,847 4.2%
12/31/2015** 6,280 44.6 11.3 404.304 64,380 2.4%
12/31/2016** 6,414 44.3 11.1 415.728 64,816 0.7%
12/31/2017** 6,579 44.1 10.8 442.445 67,251 3.8%
12/31/2018** 6,589 44.2 10.7 494.152 74,997 11.5%
12/31/2019** 6,709 44.2 10.7 514.765 76,727 14.1%
12/31/2020** 6,515 44.3 11.0 523.486 76,727 2.3%
*Covered payroll in millions.
**The City of Fort Worth requested a change in the date of the evaluation from 1/1/2015 to
12/31/2014.
Activ Average Average Covered Average Percent
Valuation Date a Age Service Payroll Salary Change
1/1/2012 19 44.7 6.0 1,547,810 81,464 3.4%
1/1/2013 19 47.4 6.8 1,467,047 77,213 -5.2%
1/1/2014 18 47.8 7.9 1,293,628 71,868 -6.9%
12/31/2014* 19 49.3 8.5 1,541,518 81,133 12.9%
12/31/2015* 19 47.2 8.7 1,639,398 86,284 6.3%
12/31/2016* 18 49.2 9.4 1,476,583 82,032 -4.9%
12/31/2017* 18 51.3 9.8 1,582,239 87,902 7.2%
12/31/2018* 16 46.8 10.2 1,494,667 93,417 6.3%
12/31/2019* 17 46.6 8.8 1,525,870 89,757 -3.9%
12/31/2020* 18 47.5 9.2 1,862,109 103,451 15.3%
*The City of Fort Worth requested a change in the date of the evaluation from 1/1/2015 to
12/31/2014.
92
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Statistical Information Overview
The objective of the Statistical Section is to provide financial statement users with additional historic
perspective,context,and detail to assist in using the information in the Basic Financial Statements,Notes to the
Basic Financial Statement, Required Supplementary Information, and Other Supplementary Information to
understand and assess the Fund's economic condition. The information contained in the statistical section is
divided into two distinct sections, financial trends and participant information.All information was derived
from Audited Annual Financial Statements and/or our Benefit Administration System.
Financial Trends
The Financial trends section is intended to assist readers in understanding how the Fund's financial position
has changed over time. The Changes in Plan Net Position for the last ten fiscal years presents additions by
source,deductions by type,and total change in plan net position for each year.Additions to net position include
member and city contributions. In addition to contributions, additions also include earnings for the Fund's
investment activities. Deductions from Net Position are primarily benefit payments and refunds paid to
participants.
Participant Data
Participant data can be found following the financial data in this section.The schedules include data on member
population,age,years of service,and various levels of benefit payment analysis.
94
Schedule of Changes in Plan Net Position: City Plan
■ 2021 2020 2019 2018 2017
Additions
Employee Contributions $ 60,281,553 $ 56,250,684 $ 40,634,725 $ 37,618,303 $ 35,963,200
Employer Contributions 128,046,174 124,743,976 113,109,911 93,504,064 89,408,134
Investment Income 524,024,718 110,570,539 67,729,548 145,408,403 250,912,773
Total Additions to Plan Net Position 712,352,445 291,565,199 221,474,184 276,530,770 376,284,107
Deductions
Retirement 188,161,116 178,887,438 171,687,119 160,170,170 149,317,259
Disability 5,136,081 5,191,272 5,261,167 5,285,218 5,324,746
Survivors 20,548,531 19,151,120 17,899,384 17,231,458 16,706,717
DROP Payouts 24,372,952 23,236,549 25,734,915 28,978,582 21,871,121
Actuarial Equivalent 575,710 724,957 920,891 875,608 1,548,691
Refund of Contributions
Separation 5,044,077 3,590,965 5,517,169 4,439,624 3,793,510
Death 143,659 182,217 218,439 821,036 49,555
Depreciation 120,844 118,393 122,282 107,178 114,971
Administrative Expenses 5,971,101 5,184,903 5,585,108 4,808,157 4,752,442
Total Deductions from Plan Net Position 250,074,071 236,267,814 232,946,474 222,717,031 203,479,012
Total Change in Plan Net Position 462,278,374 55,297,385 (11,472,290) 53,813,739 172,805,095
Net Position September 30 $ 2,830,439,044 $ 2,368,160,670 $ 2,312,863,285 $ 2,324,335,575 $ 2,270,521,836
2016 2015 2014 2013 2012
Additions
Employee Contributions $ 33,977,411 $ 32,541,773 $ 31,929,289 $ 33,633,645 $ 32,715,940
Employer Contributions 84,746,991 80,820,598 78,165,049 77,992,863 77,264,739
Investment Income 166,305,791 (20,635,550) 159,994,300 192,363,635 208,022,063
Total Additions to Plan Net Position 285,030,193 92,726,821 270,088,638 303,990,143 318,002,742
Deductions
Retirement 136,814,999 127,146,361 118,458,335 110,170,397 102,819,849
Disability 5,349,863 5,400,724 5,320,505 5,477,370 5,648,866
Survivors 16,447,307 15,746,605 15,282,876 14,649,530 14,190,329
DROP Payouts 21,903,824 13,397,352 13,745,000 12,476,037 14,108,183
Actuarial Equivalent 1,524,938 1,369,546 3,260,271 947,258 1,022,189
Refund of Contributions
Separation 3,618,760 3,952,620 4,953,166 3,936,920 3,763,795
Death 160,187 52,747 138,447 58,463 262,294
Depreciation 113,526 143,219 130,935 143,945 139,428
Administrative Expenses 4,649,611 3,823,331 3,738,927 3,570,422 3,408,430
Total Deductions from Plan Net Position 190,583,015 171,032,505 165,028,462 151,430,342 145,363,363
Total Change in Plan Net Position 94,447,178 (78,305,684) 105,060,176 152,559,801 172,639,379
Net Position September 30 $ 2,097,716,741 $ 2,003,269,563 $ 2,081,575,247 $ 1,976,515,071 $ 1,823,955,270
95
Schedule of Changes in Plan Net Position: Staff Plan
i 2021 2020 2019 2018 2017
Additions
Employee Contributions $ 328,077 $ 124,619 $ 127,207 $ 131,067 $ 124,339
Employer Contributions 497,821 353,767 241,316 250,059 237,224
Investment Income 1,400,587 278,161 170,225 303,812 500,246
Total Additions to Net Position 2,226,485 756,547 538,748 684,938 861,809
Deductions
Retirement 181,061 179,160 55,314 1,780 -
Disability - - - -
Survivors -
DROP Payouts 140,214
Actuarial Equivalent -
Refund of Contributions
Death - -
Separation - 14,294 35,933
Depreciation 342 300 288 238 228
Administrative Expenses 28,538 30,488 54,161 27,725 14,760
Total Deductions from Plan Net Position 209,941 209,948 249,977 44,037 50,921
Total Change in Plan Net Position 2,016,544 546,599 288,771 640,901 810,888
Net Position September 30 $8,019,569 $6,003,025 $5,456,426 $ 5,167,655 $4,526,754
2016 2015 2014 2013 2012
Additions
Employee Contributions $ 130,973 $ 126,984 $ 296,093 $ 122,316 $ 115,338
Employer Contributions 249,881 242,270 225,536 233,365 220,052
Investment Income 286,116 (30,772) 209,544 196,564 154,278
Total Additions to Net Position 666,970 338,482 731,173 552,245 489,668
Deductions
Retirement - - - - -
Disability
Survivors
DROP Payouts
Actuarial Equivalent
Refund of Contributions -
Death - - 8,270
Separation 11,754 16,747 - - 16,791
Depreciation 196 214 172 147 114
Administrative Expenses 27,374 5,702 4,897 3,648 2,829
Total Deductions from Plan Net Position 39,324 22,663 5,069 3,795 28,004
Total Change in Plan Net Position 627,646 315,819 726,104 548,450 461,664
Net Position September 30 $3,715,866 $3,088,220 $2,772,401 $2,046,297 $1,497,847
96
Schedule of Revenue by Source
For the Ten Years Ended September 30
Member Employer Investment
Fiscal Year Ended Contributions Contributions Income Total Revenue
September 30,2012 32,715,940 77,264,739 208,022,063 318,002,742
September 30,2013 33,633,645 77,992,863 192,363,635 303,990,143
September 30,2014 31,929,289 78,165,049 159,994,300 270,088,638
September 30,2015 32,541,773 80,820,598 (20,635,550) 92,726,821
September 30,2016 33,977,411 84,746,991 166,305,791 285,030,193
September 30,2017 35,963,200 89,408,134 250,912,773 376,284,107
September 30,2018 37,618,303 93,504,064 145,408,403 276,530,770
September 30,2019 40,634,725 113,109,911 67,729,548 221,474,184
September 30,2020 56,250,684 124,743,976 110,570,539 291,565,199
September 30,2021 60,281,553 128,046,174 524,024,718 712,352,445
September 30,2012 115,338 220,052 154,278 489,668
September 30,2013 122,316 233,365 196,564 552,245
September 30,2014* 296,093 225,536 209,544 731,173
September 30,2015 126,984 242,270 (30,772) 338,482
September 30,2016 130,973 249,881 286,116 666,970
September 30,2017 124,339 237,224 500,246 861,809
September 30,2018 131,067 250,059 303,812 684,938
September 30,2019 127,207 241,316 170,225 538,748
September 30,2020 124,619 353,767 278,161 756,547
September 30,2021* 328,077 497,821 1,400,587 2,226,485
*Member contributions are greatly increased due to employee service purchases.
97
Membership Population
As of September 30
Vested Retired Ratio of
Active Terminated Members and Non-Actives to
Year Ended Members Members Beneficiaries Actives
September,30,2012 6,281 279 3,636 0.62
September 30,2013 6,278 277 3,706 0.63
September 30,2014 6,199 296 3,820 0.66
September 30,2015 6,198 317 3,906 0.68
September 30,2016 6,280 355 4,042 0.70
September 30,2017 6,414 363 4,252 0.72
September 30,2018 6,579 375 4,391 0.72
September 30,2019 6,589 375 4,583 0.75
September 30,2020 6,709 398 4,679 0.76
September 30,2021 6,515 401 4,829 0.80
September 30,2012 19 - - -
September 30,2013 18 1 - 0.06
September 30,2014 19 1 - 0.05
September 30,2015 19 2 - 0.11
September 30,2016 18 3 - 0.17
September 30,2017 18 5 - 0.28
September 30,2018 18 7 1 0.39
September 30,2019 16 7 4 0.69
September 30,2020 17 6 4 0.59
September 30,2021 18 6 4 0.56
98
Distribution of Active Participants by Age
City Plan
as of December 31,2020
>64 183
60-64 371
55-59 775
50-54 978
45-49 912
40-44 917
35-39 951
30-34 775
25-29 527
<25 126
Distribution of Active Participants by Service
City Plan
as of December 31,2020
35+ 32
30-34 100
25-29 412
20-24 763
15- 19 832
10- 14 1049
5-9 1268
0-4 2059
99
Distribution of Retired Members by Type of Benefits
City Plan
As of September 30, 2021
Amount of Number of Type of Retirement
Monthly Retirees 1 2 3 4 5
Benefit
$ 1 - 500 219 64 23 96 8 28
$ 501 - 1,000 458 103 2 311 10 32
$ 1,001 - 1,500 415 104 259 22 30
$ 1,501 - 2,000 410 107 - 259 34 10
$ 2,001 - 2,500 419 106 - 266 37 10
$ 2,501 - 3,000 374 74 - 280 14 6
$ 3,001 - 3,500 374 64 - 281 24 5
$ 3,501 - 4,000 311 54 - 240 15 2
$ 4,001 - 4,500 259 34 - 219 6 -
$ 4,501 - 5,000 235 20 - 210 5 -
$ 5,001 - 5,500 210 17 - 191 2 -
$ 5,501 - 6,000 220 8 - 212 - -
$ 6,001 - 6,500 188 7 - 179 1 1
$ 6,501 - 7,000 185 4 - 180 1 -
Over$7,000 552 2 - 550 - -
4,829 768 25 3,733 179 124
1 - Surviving Spouse
2 - Dependent Child
3 - Regular Retirement
4- Disability Retirement
5 - QDRO/Alternate Payee
100
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Schedule of Average Benefit Payments by Years of Service
and Final Average Salary: Staff
Retirement Effective Dates Years of Credited Service
0-5 6-15 16-25
Period 01/01/2018 to 12/31/2018
*Average Monthly Benefits - $ 356 -
Average Final Salary - $ 19,410 -
Number of Active Retirees - 1 -
Period 01/01/2019 to 12/31/2019
*Average Monthly Benefits - $ 4,816 -
Average Final Salary - $ 146,515 -
Number of Active Retirees - 3 -
Period 01/01/20 to 12/31/2020
*Average Monthly Benefits - - -
Average Final Salary - - -
Number of Active Retirees - - -
Period 01/01/21 to 12/31/2021
*Average Monthly Benefits - - -
Average Final Salary - - -
Number of Active Retirees - - -
*Monthly benefits are actual benefits received during first year of retirement. These benefits may be higher
than initial benefit for those that received COLAs while in DROP or converted DROP balance to a monthly
annuity. Balances may be reduced for those that took a lump sum actuarial equivalent or elected a survivor
option at the time of retirement.
Since the Staff Plan was separated from the City plan in 2007 some members are in both the City Plan and the
Staff Plan.This represents only the years as part of the Staff Plan and the benefit paid by the Staff Plan.The
portion attributed to the City Plan is counted under the amounts reported for the City Plan.
103
Schedule of Benefits by Type
September 30
Retirement Actuarial Disability Survivor DROP
Fiscal Year Ended Benefits Equivalent Benefits Benefits Payments Total Benefits
September 30,2011 $ 94,629,017 $ 1,231,860 $ 5,673,945 $ 13,724,270 $ 10,893,575 $ 126,152,667
September 30,2012 102,819,849 1,022,189 5,648,866 14,190,329 14,108,183 137,789,416
September 30,2013 110,170,397 947,258 5,477,370 14,649,530 12,476,037 143,720,592
September 30,2014 118,458,335 3,260,271 5,320,505 15,282,876 13,745,000 156,066,987
September 30,2015 127,146,361 1,369,546 5,400,724 15,746,605 13,397,352 163,060,588
September 30,2016 136,814,999 1,524,938 5,349,863 16,447,307 21,903,824 182,040,931
September 30,2017 149,317,259 1,548,691 5,324,746 16,706,717 21,871,121 194,768,534
September 30,2018 160,170,170 875,608 5,285,218 17,231,458 28,978,582 212,541,036
September 30,2019 171,687,119 920,891 5,261,167 17,899,384 25,734,915 221,503,476
September 30,2020 178,887,438 724,957 5,191,272 19,151,120 23,236,549 227,191,336
September 30,2021 188,161,116 575,710 5,136,081 20,548,531 24,372,952 238,794,390
September•30,2018 $ 1,780 $ - $ - $ - $ - $ 1,780
September 30,2019 55,314 - - - 140,214 195,528
September 30,2020 179,160 - - - - 179,160
September 30,2021 181,061 181,061
104
Schedule of Average Benefit Payment Amounts
September 30
Number of Benefits Paid Average
Year Retirees During the Year Monthly
2011 3,517 $ 126,152,667 $ 2,989
2012 3,636 137,789,416 3,158
2013 3,706 143,720,592 3,232
2014 3,820 156,066,987 3,405
2015 3,906 163,060,588 3,479
2016 4,042 182,040,931 3,753
2017 4,252 194,768,534 3,817
2018 4,391 212,541,036 4,034
2019 4,583 221,503,476 4,028
2020 4,679 227,191,336 4,046
2021 4,829 238,794,390 4,121
2018 1 $ 1,780 $ 356
2019 4 195,528 4,074
2020 4 179,160 3,733
2021 4 181,061 3,772
105
Independent Auditor's Report On Internal Control Over
Financial Reporting and on Compliance and Other Matters
Based on Audit of Financial Statements
Performed in Accordance with Governmental Auditing
Standards
106
EideBailly®
CPAs L BUSINESS ADVISORS
Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other
Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing
Standards
To the Board of Trustees
Employees' Retirement Fund of the
City of Fort Worth,Texas
We have audited, in accordance with auditing standards generally accepted in the United States of America and
the standards applicable to financial audits contained in Government Auditing Standards issued by the
Comptroller General of the United States,the combined financial statements of the Employees' Retirement Fund
of the City of Fort Worth,Texas(the Fund)which comprise the combined statement of fiduciary net position and
the related combined statement of changes in fiduciary net position as of and for the year ended September 30,
2021,and the related notes to the combined financial statements,which collectively comprise the Fund's
combined financial statements,and have issued our report thereon dated December 16,2021.
Internal Control over Financial Reporting
In planning and performing our audit of the combined financial statements,we considered the Fund's internal
control over financial reporting(internal control)as a basis for designing the audit procedures that are
appropriate in the circumstances for the purpose of expressing our opinions on the combined financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control.
Accordingly,we do not express an opinion on the effectiveness of the Fund's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees,in the normal course of performing their assigned functions,to prevent,or detect and correct,
misstatements on a timely basis.A material weakness is a deficiency,or a combination of deficiencies,in
internal control,such that there is a reasonable possibility that a material misstatement of the Fund's combined
financial statements will not be prevented or detected and corrected on a timely basis.Asignificant deficiency is
a deficiency,or a combination of deficiencies, in internal control that is less severe than a material weakness,yet
important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section
and was not designed to identify all deficiencies in internal control that might be material weaknesses or
significant deficiencies.Given these limitations,during our audit we did not identify any deficiencies in internal
control that we consider to be material weaknesses. However, material weaknesses may exist that have not
been identified.
What inspires you,inspires us. eidehailly.mm
877 W.Main St.,Ste,800 I Boise,ID 83 702-5 85 8 I T 208.344.7150 1 F 208.344.7435 I EOE
107
Compliance and other Matttrs
As part of obtaining reasonable assurance about whether the Fund's combined financial statements are free
from material misstatement,we performed tests of its compliance with certain provisions of laws,regulations,
contracts,and grant agreements,noncompliance with which could have a direct and material effect on the
combined financial statements.However,providing an opinion on compliance with those provisions was not an
objective of our audit and,accordingly,we do not express such an opinion.The results of our tests disclosed no
instances of noncompliance or other matters that are required to be reported under Govern men tAuditing
Randards.
Purpose of this Report
The purpose of this report is Sol elyto describe the scope of our testing of internal control and compliance and
the results of that testing,and not to provide an opinion on the effectiveness of the Fund's internal control or on
compliance.This report is an integral part of an audit performed in accordance with Government A uditing
standards in considering the Fund's internal control and compliance.Accordingly,this communication is not
suitable for any other purpose.
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Boise,Idaho
December 16,2D21
108
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