BAS 2018 Aon Case Competition Kristi Intara, Ellen Mortensen, Sarah - PowerPoint PPT Presentation

BAS 2018 Aon Case Competition Kristi Intara, Ellen Mortensen, Sarah Peña, Cassandra Tai

Background and Case Objective 2018 Assumptions Status Assumptions Active Retirement Rate Social Security Terminated Healthcare Costs Vested Retirement Rate Tax Reform Active Termination Retirement Trends Rate

Status Assumptions Terminated Vested 5+ Terminated Not Vested Active 55+ Retired Active Retired Active Terminated Vested 5+ Retired Terminated Not Vested Active

Overview Calculations Projections Data - Membership - Actual - Retirement records Retirement Trends (2012-17) and - 2018 - Retirement Termination Assumptions and Rates - Cost Termination - Actuarial Implications Data Gains and Losses

Methodology in Calculations Decrement Rate = Exposure

Experience Study

• Green = Actual in CI • Red = Actual outside CI • Black = Actual with no assumption

• Green = Actual in CI • Red = Actual outside CI • Black = Actual with no assumption

• Green = Actual in CI • Red = Actual outside CI • Black = Actual with no assumption

Proposed Assumptions

Preliminary Data Analysis for Cost Implications

Early Retirement Benefit Age Benefit (YOS = Years of Service) 55 550 x YOS 56 575 x YOS 57 600 x YOS 58 625 x YOS 59 650 x YOS 60 675 x YOS 61 700 x YOS 62 725 x YOS 63 750 x YOS 64 775 x YOS

Years of Service: Active to Retired Estimated Age YOS 55 19 Active to Retired: 56 20 Overall Average Years Worked 57 21 30 58 21 59 22 25 Average Years Worked 60 22 20 61 22 62 23 15 63 23 10 64 24 65 24 5 66 25 0 67 25 50 55 60 65 70 75 Ages (55-70) 68 26 69 26 70 27

Years of Service: Active to Estimated Age YOS Terminated Vested 25 5 26 5 27 5 28 6 29 7 Active to TV: 30 7 31 8 Overall Average Years Worked 32 8 33 9 25 34 10 35 10 20 Average Years Worked 36 11 37 12 38 12 15 39 12 40 13 41 13 10 42 13 43 14 5 44 14 45 15 46 16 0 47 17 25 30 35 40 45 50 55 48 17 Age 49 17 50 17 51 18 52 19 53 20 54 21

Cost Implications

Routes to Retirement Active Retired Terminated Retired Active Vested Terminated Retired Vested Retired

Calculations Ex: Liability for active 25-year-olds who are never terminated and retire at age 65 y = number of active 25- year-old participants y x (1- T 25 ) x (1- T 26 ) x … x (1 - T 54 ) x (1- R 55 ) x … x Obligation = (1- R 64 ) x ( R 65 ) x YOS 25 x benefit 65 x (90-65)

Qualitative Analysis Increased Increased Decreased Expected retirement termination rates* rates Liability * Assuming early retirement benefit is subsidized

Shortcomings of Analysis • Assumptions for age of death in determining end of benefits • Calculated rates using same age group instead of following the same group of individuals • Estimated reduced benefits for early retirement was not found actuarially

Shortcomings of Analysis • Gender and martial status was not given, so they were not considered • Methodology in calculating cost would not have included time value of money

THANK YOU

Appendix

Proposed Assumptions

Proportion of Vested to Not Vested Termination Ages 25-29 Ages 30-34 Ages 35-39 24% 30% 36% 64% 70% 76% Vested Not Vested Vested Not Vested Vested Not Vested Ages 40-44 Ages 45-49 Ages 50-54 8% 13% 18% 82% 87% 92% Vested Not Vested Vested Not Vested Vested Not Vested