Preliminary Results of the June 30, 2014 Actuarial Valuation - PowerPoint PPT Presentation

San Diego City Employees’ Retirement System Preliminary Results of the June 30, 2014 Actuarial Valuation January 9, 2015 Gene Kalwarski, FSA David Holland, FSA

Topics for Discussion 1 • Background • Historical Trends • June 30, 3014 Valuation – Summary of Key Results – Sources of Change • A Look Ahead January 9, 2015

2 Background January 9, 2015

The Valuation Process 3 January 9, 2015

Timing 4 These June 30, 2014 valuation results are used to determine the FY 2016 Actuarially Determined Contribution (ADC) for all three plan sponsors January 9 , 2 0 1 5 July 1 , 2 0 1 5 June 3 0 , 2 0 1 4 presentation of associated ADC paid Valuation date valuation results by plan sponsors Fiscal Year 2015 Fiscal Year 2016 The Board’s normal process is to consider the January valuation results as preliminary and then vote at the March meeting January 9, 2015

Plan Effective Dates 5 Tier I - Old Plans Closed under Prop B Tier II Tier V Prop B Tier III PEPRA Tier IV Tier II benefits / some PEPRA provisions apply 2 9 9 0 0 1 1 2 2 1 2 3 3 0 0 1 1 1 1 1 1 0 1 1 1 0 0 0 0 0 0 0 0 2 0 0 0 2 2 2 2 2 2 2 2 2 2 2 / 0 / / / / / / / / / / / 1 1 1 1 1 1 1 1 2 1 1 1 / / / / / / / / / / / / 1 7 1 7 1 7 1 7 7 8 1 7 City General City Elected City Fire City Lifeguard City Police UPD General (Misc) UPD Safety Airport Authority January 9, 2015

Decisions Needed – The Discount Rate 6 • At the September 2014 Board Meeting this issue was discussed – There was rationale presented for reducing the discount rate below the current assumption of 7.25% – Another reduction of 0.25% or less may be largely or fully offset by FY 2014 investment returns in excess of the assumed rate of return – Discount rate has been changed in two of the last three years • Valuation results will be shown at 7.25% and 7.0% – We are comfortable at either of these discount rates, or anywhere in between January 9, 2015

Decisions Needed- Administrative Expenses 7 • GASB no longer allows the discount rate for financial reporting purposes to be net of administrative expenses – In recent years, SDCERS’ administrative expenses have been paid via a series of Unfunded Actuarial Liability (UAL) layers amortized over 15 years. These layers have been relatively small compared to total investment and experience gains and losses • New ASOP #27 (eff. 6/30/2015 valuation) has strong language suggesting explicit recognition of administrative expenses • Options: – No change to current practice (may not comply with ASOP #27) – Reconsider with 6/30/2015 valuation – Add explicit assumption (our preferred approach) • Add full amount to the ADC • Phase in the impact over 3-5 years January 9, 2015

8 Historical Trends January 9, 2015

Assets and Liabilities - City 9 The percentage shown at the top of each bar is the ratio of the Actuarial Value of Assets to the Actuarial Liability (the funded ratio). January 9, 2015

Contributions - City 10 FY 2016 Actuarially Determined Contribution shown without administrative expense component. January 9, 2015

Gains and Losses - City 11 G/(L) as % Investment Liability 1995 0.3% -1.1% 1996 4.1% -0.1% 1997 2.5% -0.1% 1998 5.5% -3.5% 1999 3.7% -2.1% 2000 11.8% -0.2% 2001 -3.8% -3.5% 2002 -12.8% -1.6% 2003 -12.1% -0.5% 2004 1.3% -2.3% 2005 2.8% -1.0% 2006 4.0% 0.9% 2007 1.7% -0.7% 2008 -1.7% 0.5% 2009 -19.4% -0.1% 2010 -3.2% 1.1% 2011 1.9% 0.6% 2012 -1.2% -0.6% 2013 0.5% -0.5% 2014 2.6% -0.4% January 9, 2015

Assets and Liabilities – Unified Port District 12 The percentage shown at the top of each bar is the ratio of the Actuarial Value of Assets to the Actuarial Liability (the funded ratio). January 9, 2015

Contributions – Unified Port District 13 FY 2016 Actuarially Determined Contribution shown without administrative expense component. January 9, 2015

Gains and Losses – Unified Port District 14 G/(L) as % Investment Liability 1999 3.5% -0.3% 2000 11.2% 0.1% 2001 0.9% -3.4% 2002 -10.6% -3.8% 2003 -6.6% -1.4% 2004 0.5% -1.6% 2005 1.9% -1.8% 2006 10.3% -0.4% 2007 2.1% -0.8% 2008 -1.8% 0.9% 2009 -18.9% -0.8% 2010 -3.1% -0.5% 2011 1.3% -1.1% 2012 -0.7% -1.3% 2013 0.8% 0.7% 2014 2.9% -1.0% January 9, 2015

Assets and Liabilities – Airport Authority 15 The percentage shown at the top of each bar is the ratio of the Actuarial Value of Assets to the Actuarial Liability (the funded ratio). January 9, 2015

Contributions – Airport Authority 16 FY 2016 Actuarially Determined Contribution shown without administrative expense component. January 9, 2015

Gains and Losses – Airport Authority 17 G/(L) as % Investment Liability 2003 -5.8% -8.4% 2004 3.5% -11.7% 2005 4.8% -7.9% 2006 14.3% 7.7% 2007 1.8% 0.6% 2008 -2.3% 3.2% 2009 -16.2% -2.1% 2010 -2.6% 2.5% 2011 2.5% 3.2% 2012 -1.3% -0.5% 2013 0.3% -3.7% 2014 2.3% -1.0% January 9, 2015

18 June 30, 2014 Actuarial Valuation Results January 9, 2015

Valuation Results – City 19 Valuation as of June 30, 2013 2014 2014 2014 Membership Actual Expected Actual @ 7.00% Actives 7,566 7,272 7,272 Payroll ($ in millions) $ 499.5 $ 480.5 $ 480.5 Average Salary $66,014 $66,080 $66,080 N/A In Pay Status 8,454 8,822 8,822 Total Annual Benefits ($ in millions) $ 371.6 $ 398.6 $ 398.6 Average Benefit $43,959 $45,183 $45,183 Assets and Liabilities ($ in millions) Actuarial Liability $ 7,555.5 $ 7,820.5 $ 7,858.0 $ 8,067.2 Actuarial Value Assets $ 5,317.8 $ 5,661.2 $ 5,828.6 $ 5,828.6 Market Value Assets $ 5,395.2 $ 5,744.2 $ 6,292.9 $ 6,292.9 Unfunded Actuarial Liability (UAL) $ 2,237.7 $ 2,159.3 $ 2,029.4 $ 2,238.6 Actuarial Value Funding Ratio 70.4% 72.4% 74.2% 72.3% Market Value Funding Ratio 71.4% 73.5% 80.1% 78.0% Contributions (ADC in $millions) Without Admin. Expense Add On $ 263.6 $ 261.0 $ 250.6 $ 265.6 Expected Admin. Expense $ 12.5 $ 12.5 N/A N/A Expected Admin. Expense/3 $ 4.2 $ 4.2 Expected Admin. Expense/5 $ 2.5 $ 2.5 January 9, 2015

Sources of Change – City 20 Changes in UAL and ADC (dollars in millions) UAL ADC 1. Value at June 30, 2013 $ 2,237.7 $ 263.6 2. Expected Value at June 30, 2014* 2,136.8 261.0 3. Actual Value at June 30, 2014 (without admin expense component) 2,029.4 250.6 (Favorable)/Unfavorable experience (3 - 2) 4. $ (107.5) $ (10.4) Breakdown of Experience (dollars in millions) UAL ADC 1. Actuarial investment experience different than projected $ (131.9) $ (13.9) 2. Liability experience 32.2 4.4 3. Contributions paid greater than expected (7.8) (0.7) 4. Other Misc (includes purchased service) - (0.2) 5. Total change: (sum 1 thru 4) $ (107.5) $ (10.4) * Includes projected phase-in of asset gains or losses January 9, 2015

Valuation Results – Unified Port District 21 Valuation as of June 30, 2013 2014 2014 2014 Membership Actual Expected Actual @ 7.00% Actives 417 385 385 Payroll ($ in millions) $ 34.5 $ 33.3 $ 33.3 Average Salary $82,802 $86,423 $86,423 N/A In Pay Status 485 518 518 Total Annual Benefits ($ in millions) $ 18.7 $ 21.0 $ 21.0 Average Benefit $38,497 $40,605 $40,605 Assets and Liabilities ($ in millions) Actuarial Liability $ 410.0 $ 428.8 $ 433.2 $ 445.5 Actuarial Value Assets $ 302.3 $ 323.4 $ 333.2 $ 333.2 Market Value Assets $ 309.7 $ 331.3 $ 362.2 $ 362.2 Unfunded Actuarial Liability (UAL) $ 107.7 $ 105.4 $ 99.9 $ 112.3 Actuarial Value Funding Ratio 73.7% 75.4% 76.9% 74.8% Market Value Funding Ratio 75.5% 77.3% 83.6% 81.3% Contributions (ADC in $millions) Without Admin. Expense Add On $ 14.3 $ 14.4 $ 14.1 $ 15.1 Expected Admin. Expense $ 0.7 $ 0.7 Expected Admin. Expense/3 N/A N/A $ 0.2 $ 0.2 Expected Admin. Expense/5 $ 0.1 $ 0.1 January 9, 2015

Sources of Change – Unified Port District 22 Changes in UAL and ADC (dollars in millions) UAL ADC 1. Value at June 30, 2013 $ 107.7 $ 14.3 2. Expected Value at June 30, 2014* 103.1 14.4 3. Actual Value at June 30, 2014 (without admin expense component) 99.9 14.1 4. (Favorable)/Unfavorable experience (3 - 2) $ (3.2) $ (0.3) Breakdown of Experience (dollars in millions) UAL ADC 1. Actuarial investment experience different than projected $ (7.3) $ (0.7) 2. Liability experience 4.0 0.3 3. Other Misc (includes purchased service) 0.1 $ - 4. Total change: (sum 1 thru 3) $ (3.2) $ (0.3) * Includes projected phase-in of asset gains or losses January 9, 2015