District Contribution and the Funded Ratio of the Plan October 4, - PowerPoint PPT Presentation

AC Transit District Employees’ Retirement Plan District Contribution and the Funded Ratio of the Plan October 4, 2017 Graham A. Schmidt, ASA, EA, FCA Anne D. Harper, FSA, EA, MAAA 4 of 37

Agenda • Actuarial Valuation as of January 1, 2017 • Plan costs by benefit and source • History of Plan cost and funding • Future of Plan liabilities, funding, and cost • 10-year Projections October 4, 2017 1 2 5 of 37

Current Status: Plan Cost Summary of Preliminary Plan Results % January 1, 2016 January 1, 2017 Change Participant Counts Active Participants 1,964 2,187 11.35% Participants Receiving a Benefit 2,010 2,030 1.00% Inactive Participants 230 206 -10.43% Total 4,204 4,423 5.21% Annual Pay of Active Members $ 135,001,919 $ 151,165,991 11.97% Projected Fiscal Year Actuarial Payroll $ 137,011,984 $ 153,416,725 11.97% Projected Fiscal Year Pensionable Payroll $ 170,000,000 Assets and Liabilities Actuarial Liability (AL) $ 874,284,100 $ 902,989,387 3.28% Actuarial Value of Assets (AVA 1 ) 600,832,758 614,229,823 2.23% Unfunded Actuarial Liability (UAL) $ 273,451,342 $ 288,759,564 5.60% Funded Ratio (AVA 1 ) 68.7% 68.0% -0.70% Funded Ratio (MVA) 63.3% 65.9% 2.58% Inactive Funded Ratio 59.2% 57.7% -1.41% Contributions Based on Actuarial Payroll FY 2016-2017 FY 2017-2018 Actuarially Determined Contribution 2 $ 46,767,430 $ 51,689,045 10.52% Contribution Rate (as a Percentage of Payroll) 34.13% 33.69% -0.44% Based on Projected Pensionable Payroll Actuarially Determined Contribution 2 54,012,362 Contribution Rate (as a Percentage of Payroll) 31.77% 1 2016 AVA does not include the value of District contributions due for the remaining six months of the Fiscal Year. 2015 AVA includes the value of District contributions due for the remaining six months of the Fiscal Year. 2 Assumes 20-year layers for UAL established after 1/1/2016, Offset amortization payment by UAL receivable only. October 4, 2017 3 2 6 of 37

Current Status: Changes in Cost Employer Contribution Reconciliation Total Cost as % Total Cost Payroll in Dollars FYE 2017 Net Employer Contribution 34.13% $ 46,767,430 Change due to demographic gains/losses -0.40% 76,087 and expected changes Change due to salary (gains)/losses -0.09% (34,715) during 2016 Change due to new entrants, amortization -1.10% 3,113,698 payroll Change due to investment gains/losses 0.00% 2,767 during 2016 Change due to lengthier amort of 0.64% 984,478 receivable (based on 20-year amort) Change due to reduction in receivable 0.51% 779,300 (based on 20-year amort) Change due to differences in actuarial -1.92% 2,323,317 and projected payroll estimates FYE 2018 Net Employer Contribution 31.77% $ 54,012,362 October 4, 2017 4 3 7 of 37

Current Status: Cost Breakdown Summary of Contributions for FY 2017-18 Cost as % of Cost Item Fiscal Payroll in Dollars Projected Estimated Payroll Pensionable Payroll $ 170,000,000 Amortization of Unfunded 17.21% $ 29,256,664 Expenses 0.55% 938,698 Normal Cost (Estimated) 14.01% 23,817,000 Total (Estimated) 31.77% $ 54,012,362 October 4, 2017 5 4 8 of 37

Plan Normal Cost By Benefit October 4, 2017 6 5 9 of 37

Plan Cost By Source October 4, 2017 7 6 10 of 37

Plan Cost History October 4, 2017 8 7 11 of 37

Plan Funding History October 4, 2017 9 8 12 of 37

Looking Ahead • History of Plan liabilities • Changes in Amortization Policy and Assumptions • Projected future contributions • Projected future funded ratios October 4, 2017 9 10 13 of 37

History of Actuarial Liability ($) October 4, 2017 10 11 14 of 37

Amortization Policy • At August, 2016 meeting, Retirement Board voted to adopt “closed, layered” amortization periods – 2008 extraordinary loss: 23-year closed period, 37 years remaining as of 2017, $84 million outstanding balance – Remaining UAL as of 2016: 11 years remaining as of 2017, $205 million outstanding balance – Board elected to defer decision on amortization periods for future UAL changes until 2017 • Retirement Board deliberated amortization policies at May and June, 2017 meetings – Adopted 20-year amortization periods for future gains/losses and assumption changes – Shorter periods for any future plan changes, based on analysis by Board October 4, 2017 11 15 of 37

Amortization Policy Table IV-2 Development of Amortization Payment for Fiscal Year 2018 Initial 1/1/2017 Remaining Date Initial Amortization Outstanding Amortization Amortization Type of Base Established Amount Years Balance Years Amount 37 2008 Extraordinary Actuarial Loss 1/1/2009 $ 78,762,712 30 $ 84,252,277 $ 5,666,879 Remaining UAL as of 2016 1/1/2016 212,567,221 12 204,478,197 11 22,568,906 2016 Experience Loss 1/1/2017 29,089 20 29,089 20 2,079 Total Unfunded Actuarial Liability (UAL) $ 288,759,563 $ 28,237,864 Offset to UAL for 1/1-6/30 Contribution Receivable (13,419,405) 20 (958,923) Net UAL Payment $ 27,278,941 With Interest to Fiscal Year 29,256,664 Combination of three amortization “layer” payments comparable to 13-year single equivalent layer October 4, 2017 1 12 16 of 37 3

Assumptions • At July and August, 2017 meetings, Retirement Board reviewed the economic assumptions – Received information from investment consultant and actuary on expected returns, and input from District – Left discount rate at 7.25% for 2017, but voted to reduced rate to 7.125% for the 2018 valuation, and 7.00% for the 2019 valuation October 4, 2017 13 17 of 37

Projections – Contributions Projections based on 7.00% actual projected return for 2017+, regardless of discount rate used. October 4, 2017 14 18 of 37

Projections – Funded Ratio Projections based on 7.00% actual projected return for 2017+, regardless of discount rate used. October 4, 2017 15 19 of 37

Projections Discount Contribution Contribution Funded Rates 1 Amounts 1 Ratios 2 Year Rate 2017 7.25% 31.77% $54,012,000 65.86% 2018 7.125% 32.81% $57,448,000 66.55% 2019 7.00% 34.11% $61,527,000 67.58% 2020 7.00% 34.48% $64,057,000 69.66% 2021 7.00% 34.47% $65,956,000 71.93% 2022 7.00% 34.52% $68,022,000 74.29% 2023 7.00% 34.55% $70,128,000 76.73% 2024 7.00% 34.57% $72,287,000 79.26% 2025 7.00% 34.60% $74,512,000 81.88% 2026 7.00% 34.63% $76,806,000 84.63% 1 Based on projected pensionable payroll 2 Based on market value of assets October 4, 2017 16 20 of 37

Required Disclosures • The purpose of this presentation is to discuss the current status and outlook for the Alameda - Contra Costa Transit District (AC Transit) Retirement Plan. This presentation is for the use of the Retirement Board in its education and outreach efforts. • In preparing this presentation, we relied on information (some oral and some written) supplied by Staff at AC Transit. This information includes, but is not limited to, the plan provisions, employee data, and financial information. • To the best of our knowledge, this presentation and its contents have been prepared in accordance with generally recognized and accepted actuarial principles and practices which are consistent with the Code of Professional Conduct and applicable Actuarial Standards of Practice set out by the Actuarial Standards Board. Furthermore, as credentialed actuaries, we meet the Qualification Standards of the American Academy of Actuaries to render the opinion contained in this presentation. This presentation does not address any contractual or legal issues. We are not attorneys and our firm does not provide any legal services or advice. • This presentation was prepared solely for the Retirement Board of AC Transit for the purposes described herein. This presentation is not intended to benefit any third party and Cheiron assumes no duty or liability to any such party. Graham A. Schmidt, ASA, EA, FCA Anne D. Harper, FSA, EA, MAAA October 4, 2017 17 18 21 of 37

Contacts Graham Schmidt • gschmidt@cheiron.us, (703) 893-1456 x1137 Anne Harper • aharper@cheiron.us, (703) 893-1456 x1107 Tim Doyle • tdoyle@cheiron.us, (703) 893-1456 x1140 October 4, 2017 1 9 18 22 of 22