GASB STATEMENT NO. 68 REPORT

Transcription

1 GASB STATEMENT NO. 68 REPORT FOR THE IOWA PUBLIC EMPLOYEES RETIREMENT SYSTEM MEASUREMENT DATE: JUNE 30, 2018

2 Cavanaugh Macdonald C O N S U L T I N G, L L C The experience and dedication you deserve November 28, 2018 Ms. Darla Iverson Chief Financial Officer Iowa Public Employees Retirement System 7401 Register Drive Des Moines, IA Dear Ms. Iverson: Presented in this report is information to assist the Iowa Public Employees Retirement System in providing information required under the Governmental Accounting Standards Board (GASB) Statement No. 68 to participating employers. GASB Statement No. 68 establishes accounting and financial reporting requirements for governmental employers who provide pension benefits to their employees through a trust. This report has been prepared as of June 30, 2018, the Measurement Date. The annual actuarial valuation used as a basis for much of the information presented in this report was performed as of June 30, The valuation was based upon data, furnished by the Iowa Public Employees Retirement System staff, concerning active, inactive and retired members along with pertinent financial information. This information was reviewed for completeness and internal consistency, but was not audited by us. The valuation results depend on the integrity of the data. If any of the information is inaccurate or incomplete, our results may be different and our calculations may need to be revised. Please see the actuarial valuation report for additional details on the funding requirements for the System including actuarial assumptions and methods along with the Contribution Rate Funding Policy. To the best of our knowledge, the information contained in this report is complete and accurate. Please note that the allocation of the proportionate share of the collective Net Pension Liability, Pension Expense, and Deferred Inflows and Outflows to participating employers under GASB 68 will be performed by the Iowa Public Employees Retirement System and, therefore, is not included in this report. The calculations were performed by qualified actuaries according to generally accepted actuarial principles and practices, as well as in conformity with Actuarial Standards of Practice issued by the Actuarial Standards Board. The calculations are based on the current provisions of the System and on actuarial assumptions that are internally consistent and individually reasonable based on the actual experience of the System. In addition, the calculations were completed in compliance with applicable law and, in our opinion, meet the requirements of GASB Raynor Pkwy, Suite 202, Bellevue, NE Phone (402) Fax (402) Offices in Kennesaw, Off GA Bellevue, NE

3 Ms. Darla Iverson November 28, 2018 Page 2 These results are only for financial reporting and may not be appropriate for funding purposes or other types of analysis. Calculations for purposes other than satisfying the requirements of GASB 68 may produce significantly different results. Future actuarial results may differ significantly from the current results presented in this report due to such factors as changes in plan experience or changes in economic or demographic assumptions. We, Patrice A. Beckham, FSA and Brent A Banister, FSA, are members of the American Academy of Actuaries and meet the Qualification Standards to render the actuarial opinion contained herein. We are available to answer any questions on the material contained in this report or to provide explanations or further details as may be appropriate. Respectfully submitted, Patrice A. Beckham, FSA, EA, FCA, MAAA Principal and Consulting Actuary Brent A. Banister, PhD, FSA, EA, FCA, MAAA Chief Actuary

4 TABLE OF CONTENTS Section Item Page No. I Summary of Principal Results 1 II Introduction 2 III Pension Expense 4 IV Notes to Financial Statements 9 V Required Supplementary Information 26 Appendix A Schedule of Changes in the Employers Net Pension Liability 28 B Summary of Plan Provisions 32 C Statement of Actuarial Assumptions 39 D Contribution Rate Funding Policy 46

5 GASB STATEMENT NO. 68 IOWA PUBLIC EMPLOYEES RETIREMENT SYSTEM SECTION I - SUMMARY OF PRINCIPAL RESULTS ALL MEMBERSHIP GROUPS Valuation Date (VD): June 30, 2018 Prior Measurement Date: June 30, 2017 Measurement Date (MD): June 30, 2018 Membership Data for Valuation: Retirees and Beneficiaries 120,755 Inactive Vested Members 25,693 Inactive Nonvested Members 44,330 Active Members 170,376 Total 361,154 Single Equivalent Interest Rate (SEIR): Long-Term Expected Rate of Return 7.00% Municipal Bond Index Rate at Prior Measurement Date 3.56% Municipal Bond Index Rate at Measurement Date 3.89% Year in which Fiduciary Net Position is Projected to be Depleted N/A Single Equivalent Interest Rate at Prior Measurement Date 7.00% Single Equivalent Interest Rate at Measurement Date 7.00% Collective Net Pension Liability: Total Pension Liability (TPL) $38,642,833,653 Fiduciary Net Position (FNP) 32,314,588,595 Net Pension Liability (NPL = TPL FNP) $6,328,245,058 FNP as a percentage of TPL 83.62% Collective Pension Expense: $893,113,548 Collective Deferred Outflows of Resources: $1,784,515,738 Collective Deferred Inflows of Resources: $1,154,088,616 Page 1

6 SECTION II INTRODUCTION The Governmental Accounting Standards Board issued Statement No. 68 (GASB 68), Accounting and Financial Reporting For Pensions in June GASB 68 s effective date for employers was the first fiscal year beginning after June 15, The Iowa Public Employees Retirement System (System) is a cost-sharing, multiple-employer defined benefit pension plan as defined by GASB 68. This report, prepared as of June 30, 2018 (the Measurement Date), presents information to assist the Iowa Public Employees Retirement System in providing the required information under GASB 68 to participating employers. Much of the material provided in this report, including the Net Pension Liability, is based on the results of the GASB 67 report for the Iowa Public Employees Retirement System, which was issued November 7, See that report for more information on the member data and actuarial assumptions and methods used in developing the GASB 67 results. GASB 68 requires the inclusion of a proportionate share of the Net Pension Liability (NPL) on each participating employer s balance sheet and to determine and show a proportionate share of a Pension Expense (PE) in the Notes to Financial Statements that may bear little relationship to the funding requirements for the Iowa Public Employees Retirement System. In fact, it is possible in some years for the NPL to be an asset or the PE to be an income item. The NPL is set equal to the Total Pension Liability (TPL) minus the Fiduciary Net Position (FNP). The benefit provisions recognized in the calculation of the TPL are summarized in Appendix B. The Iowa Public Employees Retirement System is a cost-sharing multiple-employer plan so the NPL and PE are allocated among the participating employers. Those amounts, which are needed for the employers financial statements, will be determined by the Iowa Public Employees Retirement System. PE includes amounts for Service Cost (the Normal Cost under Entry Age Normal (EAN) for the year), interest on the TPL, employee contributions, administrative expenses, other cash flows during the year, recognition of increases/decreases in the TPL due to changes in the benefit structure, actual versus expected experience, actuarial assumption changes, and recognition of investment gains/losses. The actual experience and assumption change impacts are recognized over the average expected remaining service life of the System membership as of the beginning of the measurement period, while investment gains/losses are recognized equally over five years. The development of the PE is shown in Section III. The unrecognized portions of each year s experience, assumption changes and investment gains/losses are used to develop Deferred Inflows and Outflows of Resources which also must be included on the employer s balance sheet. Among the items needed for the TPL calculation is a discount rate, as defined by GASB, or a Single Equivalent Interest Rate (SEIR). To determine the SEIR, the FNP must be projected into the future for as long as there are anticipated benefits payable under the plan s provision applicable to the membership and beneficiaries of the System on the Measurement Date. If the FNP is not projected to be depleted at any point in the future, the long-term expected rate of return on plan investments expected to be used to finance the benefit payments may be used as the SEIR. Page 2

7 If, however, the FNP is projected to be depleted at a future measurement date, the SEIR is determined as the single rate that will generate a present value of benefit payments equal to the sum of the present value determined by discounting all projected benefit payments through the date of depletion by the long-term expected rate of return, and the present value determined by discounting those benefits after the date of depletion by a 20-year tax-exempt municipal bond (rating AA/Aa or higher) rate. The rate used, if necessary, for this purpose is the monthly average of the Bond Buyers General Obligation 20-year Municipal Bond Index Rate (formerly published monthly by the Board of Governors of the Federal Reserve System). Our calculations indicated that the FNP is not projected to be depleted, so the Municipal Bond Index Rate is not used in the determination of the SEIR. The SEIR is 7.00%, the long-term assumed rate of return on investments in effect at the current and Prior Measurement Dates, and meets the requirements of GASB 67 and 68. The FNP projections are based upon the Iowa Public Employees Retirement System s financial status on the Measurement Date, the indicated set of methods and assumptions, and the requirements of GASB 68. As such, the FNP projections are not reflective of the cash flows and asset accumulations that would occur on an ongoing plan basis, reflecting the impact of future members. Therefore, the results of this test do not necessarily indicate whether or not the fund will actually run out of money, the financial condition of the System, or the System s ability to make benefit payments in future years. Although all the assets of the Iowa Public Employees Retirement System are held in one trust, there are three distinct membership groups (Regular Membership, the Sheriffs and Deputies group, and the Protection Occupation group) for whom separate contribution rates are determined each year. Paragraph 49 of GASB 68 provides to the extent that different contribution rates are assessed based on separate relationships that constitute the NPL, the determination of the employer s proportionate share of the collective NPL should be made in a manner that reflects those separate relationships. Therefore, the calculations of the NPL, PE and Deferred Inflows and Outflows were performed separately for each of the membership groups: Regular Membership, Sheriffs and Deputies and Protection Occupation. For informational purposes only, the results for each group were added together to determine the collective NPL, collective PE and collective Deferred Inflows and Outflows. The sections that follow provide the results of all the required collective calculations, presented in the order laid out in GASB 68 for note disclosure and Required Supplementary Information (RSI). The Iowa Public Employees Retirement System will prepare the calculation of the proportionate share of the collective NPL, collective Pension Expense and collective Deferred Inflows and Outflows for each participating employer. Page 3

8 SECTION III PENSION EXPENSE As noted earlier, the collective Pension Expense (PE) consists of a number of different items. GASB 68 refers to the first item as Service Cost, which is the Normal Cost using the Entry Age Normal (EAN) actuarial cost method. The second item is interest on the TPL at 7.00%, the SEIR in effect as of the Prior Measurement Date. The next three items refer to any changes that occurred in the TPL due to: benefit changes, actual versus expected experience, or changes in actuarial assumptions or other inputs. Benefit changes, which are recognized immediately, will increase PE if there is a benefit improvement for existing System members, or decrease PE if there is a benefit reduction. For the year ended June 30, 2018 there were no benefit changes to be recognized. The next item to be recognized is the portion of current year changes in TPL due to actual versus expected experience for the year. The portion to recognize in the current year is determined by spreading the total change over the average expected remaining service life of the entire System membership at the beginning of the measurement period. The average expected remaining service life of active members is the average number of years the active members are expected to remain in covered employment. At the beginning of the measurement period, this number is years. The average expected remaining service life of the inactive members is zero. Therefore, the recognition period is the weighted average of these two amounts, or 5.28 years. The last item under changes in TPL is changes in actuarial assumptions or other inputs. There were a number of changes in the actuarial assumptions since the Prior Measurement Date. These assumptions are detailed in Section V of this report. These changes will be recognized over the average expected remaining service life of the entire System membership, using the same approach that applied to experience gains and losses as described earlier. Employee contributions, including service purchases, and projected earnings on the FNP at the long-term rate of return are subtracted from the amount determined thus far. One-fifth of the current-period differences between projected and actual earnings on the FNP is recognized in the PE. The current year portions of previously determined experience, assumption and earnings amounts, recognized as Deferred Outflows of Resources and Deferred Inflows of Resources are included next. Deferred Outflows of Resources are added to the PE while Deferred Inflows of Resources are subtracted from the PE. Finally, administrative expenses and other miscellaneous items are included. The calculation of the collective PE for the year ended June 30, 2018 is shown in the following table. Page 4

9 Collective Pension Expense For the Year Ended June 30, 2018 ALL MEMBERSHIP GROUPS Service Cost at end of year $862,716,803 Interest on the Total Pension Liability 2,548,179,239 Current-period benefit term changes 0 Expensed portion of current-period difference between expected and actual experience in the Total Pension Liability (24,948,383) Expensed portion of current-period assumption changes 6,559,735 Employee contributions including service purchases (486,035,402) Projected earnings on plan investments (2,122,756,073) Expensed portion of current-period difference between projected and actual earnings on plan investments (67,242,565) Administrative expenses 14,753,842 Recognition of beginning Deferred Outflows of Resources 834,459,785 Recognition of beginning Deferred Inflows of Resources (672,573,433) Total Pension Expense $893,113,548 Note: System experience and assumption changes are recognized over the average expected remaining service life for all System members, which is 5.28 years. Page 5

10 Pension Expense For the Year Ended June 30, 2018 REGULAR MEMBERS Service Cost at end of year $785,381,044 Interest on the Total Pension Liability 2,393,568,949 Current-period benefit term changes 0 Expensed portion of current-period difference between expected and actual experience in the Total Pension Liability (24,068,574) Expensed portion of current-period assumption changes 12,027,713 Employee contributions including service purchases (452,000,035) Projected earnings on plan investments (1,969,504,392) Expensed portion of current-period difference between projected and actual earnings on plan investments (62,408,234) Administrative expenses 14,153,625 Recognition of beginning Deferred Outflows of Resources 783,529,389 Recognition of beginning Deferred Inflows of Resources (623,525,155) Total Pension Expense $857,154,330 Note: System experience and assumption changes are recognized over the average expected remaining service life for all System members, which is 5.28 years. Page 6

11 Pension Expense For the Year Ended June 30, 2018 SHERIFFS AND DEPUTIES Service Cost at end of year $18,996,673 Interest on the Total Pension Liability 47,259,726 Current-period benefit term changes 0 Expensed portion of current-period difference between expected and actual experience in the Total Pension Liability (663,529) Expensed portion of current-period assumption changes (5,167,868) Employee contributions including service purchases (10,564,954) Projected earnings on plan investments (45,190,667) Expensed portion of current-period difference between projected and actual earnings on plan investments (1,405,861) Administrative expenses 113,406 Recognition of beginning Deferred Outflows of Resources 15,888,960 Recognition of beginning Deferred Inflows of Resources (15,535,778) Total Pension Expense $3,730,108 Note: System experience and assumption changes are recognized over the average expected remaining service life for all System members, which is 5.28 years. Page 7

12 Pension Expense For the Year Ended June 30, 2018 PROTECTION OCCUPATION Service Cost at end of year $58,339,086 Interest on the Total Pension Liability 107,350,564 Current-period benefit term changes 0 Expensed portion of current-period difference between expected and actual experience in the Total Pension Liability (216,280) Expensed portion of current-period assumption changes (300,110) Employee contributions including service purchases (23,470,413) Projected earnings on plan investments (108,061,014) Expensed portion of current-period difference between projected and actual earnings on plan investments (3,428,470) Administrative expenses 486,811 Recognition of beginning Deferred Outflows of Resources 35,041,436 Recognition of beginning Deferred Inflows of Resources (33,512,500) Total Pension Expense $32,229,110 Note: System experience and assumption changes are recognized over the average expected remaining service life for all System members, which is 5.28 years. Page 8

13 SECTION IV NOTES TO FINANCIAL STATEMENTS The material presented herein will follow the order presented in GASB 68. Paragraph numbers are provided for ease of reference. Amounts are shown in the aggregate. The Iowa Public Employees Retirement System will determine the proportionate share of certain amounts for individual employers as required by GASB 68. Paragraph 74: The information required is to be prepared by the Iowa Public Employees Retirement System and/or the individual employer. Paragraph 75: The information required is to be prepared by the individual employer. Paragraphs 76(a) (d): The information required is to be supplied by The Iowa Public Employees Retirement System. Paragraph 77: This paragraph requires information to be disclosed regarding the actuarial assumptions and other inputs used to measure the TPL. The complete set of actuarial assumptions and other inputs utilized in developing the TPL are outlined in Appendix C. The TPL as of June 30, 2018 was determined based on an actuarial valuation prepared as of June 30, 2018, using the following key actuarial assumptions and other inputs (which changed since the prior Measurement Date): Rate of Inflation Rate of salary increases, including inflation Long-term Rate of Return, net of investment expense, including inflation Municipal Bond Index Rate Year FNP is projected to be depleted Single Equivalent Interest Rate, net of investment expense, including inflation 2.60 percent 3.25 to percent 7.00 percent 3.89 percent N/A 7.00 percent Post-retirement benefit increases 1) Pre 7/1/1990 retirees: Dividends are assumed to increase 2.60% per year. 2) Post 6/30/1990 retirees: A Favorable Experience Dividend (FED) reserve account exists to help offset the negative effects of post-retirement inflation. As of the Measurement Date, there was no FED reserve account balance and no future transfers were expected to occur. Therefore, no post-retirement benefit increase was reflected for this group in the TPL. Page 9

14 Rates of Mortality Mortality rates were based on the RP-2014 Generational Mortality Tables, with age setbacks and age set forwards as well as other adjustments based on different membership groups. Future mortality improvements are anticipated using Projection Scale MP Different adjustments apply to pre-retirement, postretirement, and post-disability mortality tables. See Appendix C for more detailed descriptions. The demographic actuarial assumptions used in the valuation are based on the results of the actuarial experience study, dated June 28, 2018, which covered the four-year period ending June 30, At the Investment Board s direction, the experience study of the System s economic assumptions, including the long-term rate of return, was accelerated a year resulting in a full review of the economic assumptions in early The findings of the experience study on economic assumptions, along with the resulting recommendations, are included in the report dated March 24, Paragraph 78 (a) Discount rate (SEIR): The discount rate used to measure the TPL at June 30, 2018 was 7.00 percent. There was no change since the Prior Measurement Date. (b) Projected cash flows: The projection of cash flows used to determine the discount rate assumed that plan contributions from employees and employers will be made according to the current Contribution Rate Funding Policy (see Appendix D) and that all actuarial assumptions are met in the future: a. Employee contribution rate: 40% of the Required Contribution Rate for Regular and Protection Occupation membership. 50% of the Required Contribution Rate for Sheriffs and Deputies. See Appendix B for more detail. b. Employer contribution rate: 60% of the Required Contribution Rate for Regular and Protection Occupation membership. 50% of the Required Contribution Rate for Sheriffs and Deputies. See Appendix B for more detail. c. Administrative expenses in the prior year were projected forward with inflation as an estimate for administrative expenses in the current and future years. The portion of expenses in future years allocated to the current members was based on the proportionate share of covered payroll in each year for the remainder of the existing members to the total covered payroll for all members. Based on those assumptions, the System s FNP was projected to be available to make all projected future benefit payments of current System members. Therefore, the long-term expected rate of return on System investments of 7.00% was applied to all periods of projected benefit payments to determine the TPL. The FNP projections are based upon the System s financial status on the Measurement Date, the indicated set of methods and assumptions, and the requirements of GASB 67 and 68. As such, the Page 10

15 FNP projections are not reflective of the cash flows and asset accumulations that would occur on an ongoing System basis, reflecting the impact of future members. Therefore, the results of this test do not necessarily indicate whether or not the fund will actually run out of money, the financial condition of the System, or the System s ability to make benefit payments in future years. (c) Long-term rate of return: The long-term expected return on plan assets, 7.00% effective June 30, 2018, is reviewed as part of regular experience studies, prepared every four years for the System. The Investment Board elected to accelerate the experience study of the economic assumptions by one year, performing the study in early That recent analysis of economic assumptions is outlined in a report dated March 24, Several factors are considered in evaluating the long-term rate of return assumption, including long-term historical data, estimates inherent in current market data, and an analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of investment expense and inflation), along with estimates of variability and correlations for each asset class, were developed by the System s investment consultant. These ranges were combined to develop the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation. The capital market assumptions developed by investment consultants are often intended for use over a 10-year investment horizon and are not always useful in setting the long-term rate of return for funding pension plans which covers a longer timeframe. The longterm rate of return assumption is intended to be a long-term assumption (30 to 50 years) and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years. (d) Municipal bond rate: A municipal bond rate was not used in determining the discount rate. If it were required, the rate would be 3.89% on the Measurement Date. (e) Periods of projected benefit payments: Projected future benefit payments for all current plan members were projected through (f) Assumed asset allocation: This information will be supplied by the System. Page 11

16 (g) Sensitivity analysis: This paragraph requires disclosure of the sensitivity of the NPL to changes in the discount rate. The following presents the collective NPL of the System, calculated using the discount rate of 7.00 percent, as well as what the System s NPL would be if it were calculated using a discount rate that is 1-percentage-point lower (6.00 percent) or 1-percentagepoint higher (8.00 percent) than the current rate. 1% Decrease (6.00%) Current Discount Rate (7.00%) 1% Increase (8.00%) All Membership Groups Total Pension Liability $43,354,752,768 $38,642,833,653 $34,690,593,035 Fiduciary Net Position $32,314,588,595 $32,314,588,595 $32,314,588,595 Net Pension Liability $11,040,164,173 $6,328,245,058 $2,376,004,440 Regular Members Total Pension Liability $40,699,832,341 $36,289,160,885 $32,589,263,023 Fiduciary Net Position $29,962,905,119 $29,962,905,119 $29,962,905,119 Net Pension Liability $10,736,927,222 $6,326,255,766 $2,626,357,904 Sheriffs and Deputies Total Pension Liability $784,934,309 $697,339,410 $623,898,136 Fiduciary Net Position $693,572,370 $693,572,370 $693,572,370 Net Pension Liability $91,361,939 $3,767,040 ($69,674,234) Protection Occupation Total Pension Liability $1,869,986,118 $1,656,333,358 $1,477,431,876 Fiduciary Net Position $1,658,111,106 $1,658,111,106 $1,658,111,106 Net Pension Liability $211,875,012 ($1,777,748) ($180,679,230) Paragraph 79: The required information will be supplied by the Iowa Public Employees Retirement System. Page 12

17 Paragraph 80: (a)-(b) This information will be supplied by the Iowa Public Employees Retirement System. (c) The Measurement Date of the collective NPL is June 30, The TPL as of June 30, 2018 was determined based on the June 30, 2018 actuarial valuation for funding, dated October 29, (d) There were a number of changes in the actuarial assumptions since the Prior Measurement Date. These assumptions are detailed in Section V of this report. (e) There was no change in the benefit terms that affected measurement of the TPL since the Prior Measurement Date. (f) The information will be supplied by the Iowa Public Employees Retirement System. (g) Please see Section III for the development of the collective PE. The Iowa Public Employees Retirement System will provide the proportionate share for each participating employer. (h)(1) (3) Since certain expense items are recognized over closed periods each year, the deferred portions of these items must be tracked annually. If the amounts serve to reduce PE they are labeled Deferred Inflows of Resources. If they will increase PE they are labeled Deferred Outflows of Resources. The recognition of these amounts is accomplished on a level dollar basis, with no interest included in the deferred amounts. Experience gains/losses and the impact of changes in actuarial assumptions, if any, are recognized over the average expected remaining service life of the active and inactive System members at the beginning of the measurement period. Investment gains and losses are recognized equally over a five-year period. Paragraph 53 of GASB 68 states that the employer s proportionate share of PE and Deferred Inflows and Outflows should be determined using the employer s proportionate share of the collective NPL. Since the allocation of the collective NPL will be performed separately for each of the membership groups, Regular Membership, Sheriffs and Deputies and Protection Occupation groups, the PE and Deferred Inflows and Outflows are also allocated by membership group. The following tables provide a summary of the amounts of the Deferred Outflows of Resources and Deferred Inflows of Resources as of the Measurement Date (June 30, 2018) for each of the three membership groups in the Iowa Public Employees Retirement System: (1) the Regular Membership, (2) Sheriffs and Deputies and (3) Protection Occupation. Per GASB 68, reporting of the differences between projected and actual earnings should be on a net basis, with only one Deferred Outflow or Inflow. This information is provided in the following tables. Page 13

18 Regular Membership Deferred Outflows of Resources Deferred Inflows of Resources Net Deferred Outflows/(Inflows) of Resources Differences between expected and actual experience $34,685,920 $142,983,617 ($108,297,697) Changes of assumptions 902,479, ,479,525 Differences between projected and actual earnings 737,116, ,941,539 (173,825,164) Total $1,674,281,820 $1,053,925,156 $620,356,664 Sheriffs and Deputies Deferred Outflows of Resources Deferred Inflows of Resources Net Deferred Outflows/(Inflows) of Resources Differences between expected and actual experience $2,091,956 $4,288,292 ($2,196,336) Changes of assumptions 16,949,549 22,414,660 (5,465,111) Differences between projected and actual earnings 16,209,899 20,463,644 (4,253,745) Total $35,251,404 $47,166,596 ($11,915,192) Protection Occupation Deferred Outflows of Resources Deferred Inflows of Resources Net Deferred Outflows/(Inflows) of Resources Differences between expected and actual experience $827,223 $2,707,154 ($1,879,931) Changes of assumptions 35,757,406 1,295,452 34,461,954 Differences between projected and actual earnings 38,397,885 48,994,258 (10,596,373) Total $74,982,514 $52,996,864 $21,985,650 Page 14

19 The following table provides a summary of the amounts of Deferred Outflows of Resources and Deferred Inflows of Resources as of June 30, 2018 for the System in total (all membership groups). This table is provided for summary purposes only. Deferred Outflows of Resources Deferred Inflows of Resources Net Deferred Outflows/(Inflows) of Resources Differences between expected and actual experience $37,605,099 $149,979,063 ($112,373,964) Changes of assumptions 955,186,480 23,710, ,476,368 Differences between projected and actual earnings 791,724, ,399,441 (188,675,282) Total $1,784,515,738 $1,154,088,616 $630,427,122 The following tables show the Deferred Outflows of Resources and Deferred Inflows of Resources separately to provide additional detail. Page 15

20 Regular Membership - Deferred Outflows of Resources June 30, 2017 Additions Recognition June 30, 2018 (1) (2) (3) (4) = (1) + (2) - (3) Differences between expected and actual experience FY 2014 Base $ 13,154,081 $ 0 $ 10,276,629 $ 2,877,452 FY 2015 Base 21,965, ,719,455 12,246,514 FY 2016 Base FY 2017 Base 25,489, ,927,864 19,561,954 FY 2018 Base Total $ 60,609,868 $ 0 $ 25,923,948 $ 34,685,920 Changes of assumptions FY 2014 Base $ 53,415,180 $ 0 $ 41,730,611 $ 11,684,569 FY 2015 Base FY 2016 Base FY 2017 Base 1,093,654, ,338, ,316,345 FY 2018 Base 0 63,506,324 12,027,713 51,478,611 Total $ 1,147,069,812 $ 63,506,324 $ 308,096,611 $ 902,479,525 Differences between projected and actual earnings FY 2014 Base $ 0 $ 0 $ 0 $ 0 FY 2015 Base 371,913, ,956, ,956,710 FY 2016 Base 826,739, ,579, ,159,665 FY 2017 Base FY 2018 Base Total $ 1,198,652,918 $ 0 $ 461,536,543 $ 737,116,375 Total $ 2,406,332,598 $ 63,506,324 $ 795,557,102 $ 1,674,281,820 Page 16

21 Regular Membership - Deferred Inflows of Resources June 30, 2017 Additions Recognition June 30, 2018 (1) (2) (3) (4) = (1) + (2) - (3) Differences between expected and actual experience FY 2014 Base $ 0 $ 0 $ 0 $ 0 FY 2015 Base FY 2016 Base 57,198, ,228,502 39,970,122 FY 2017 Base FY 2018 Base 0 127,082,069 24,068, ,013,495 Total $ 57,198,624 $ 127,082,069 $ 41,297,076 $ 142,983,617 Changes of assumptions FY 2014 Base $ 0 $ 0 $ 0 $ 0 FY 2015 Base FY 2016 Base FY 2017 Base FY 2018 Base Total $ 0 $ 0 $ 0 $ 0 Differences between projected and actual earnings FY 2014 Base $ 385,860,451 $ 0 $ 385,860,451 $ 0 FY 2015 Base FY 2016 Base FY 2017 Base 881,744, ,436, ,308,604 FY 2018 Base 0 312,041,169 62,408, ,632,935 Total $ 1,267,605,257 $ 312,041,169 $ 668,704,887 $ 910,941,539 Total $ 1,324,803,881 $ 439,123,238 $ 710,001,963 $ 1,053,925,156 Page 17

22 Sheriffs and Deputies - Deferred Outflows of Resources June 30, 2017 Additions Recognition June 30, 2018 (1) (2) (3) (4) = (1) + (2) - (3) Differences between expected and actual experience FY 2014 Base $ 0 $ 0 $ 0 $ 0 FY 2015 Base FY 2016 Base FY 2017 Base 2,725, ,926 2,091,956 FY 2018 Base Total $ 2,725,882 $ 0 $ 633,926 $ 2,091,956 Changes of assumptions FY 2014 Base $ 0 $ 0 $ 0 $ 0 FY 2015 Base FY 2016 Base FY 2017 Base 22,085, ,136,227 16,949,549 FY 2018 Base Total $ 22,085,776 $ 0 $ 5,136,227 $ 16,949,549 Differences between projected and actual earnings FY 2014 Base $ 0 $ 0 $ 0 $ 0 FY 2015 Base 8,055, ,027,715 4,027,716 FY 2016 Base 18,273, ,091,092 12,182,183 FY 2017 Base FY 2018 Base Total $ 26,328,706 $ 0 $ 10,118,807 $ 16,209,899 Total $ 51,140,364 $ 0 $ 15,888,960 $ 35,251,404 Page 18

23 Sheriffs and Deputies - Deferred Inflows of Resources June 30, 2017 Additions Recognition June 30, 2018 (1) (2) (3) (4) = (1) + (2) - (3) Differences between expected and actual experience FY 2014 Base $ 1,105,217 $ 0 $ 863,451 $ 241,766 FY 2015 Base 52, ,250 29,297 FY 2016 Base 1,684, ,468 1,177,325 FY 2017 Base FY 2018 Base 0 3,503, ,529 2,839,904 Total $ 2,842,557 $ 3,503,433 $ 2,057,698 $ 4,288,292 Changes of assumptions FY 2014 Base $ 1,354,002 $ 0 $ 1,057,815 $ 296,187 FY 2015 Base FY 2016 Base FY 2017 Base FY 2018 Base 0 27,286,341 5,167,868 22,118,473 Total $ 1,354,002 $ 27,286,341 $ 6,225,683 $ 22,414,660 Differences between projected and actual earnings FY 2014 Base $ 8,137,062 $ 0 $ 8,137,062 $ 0 FY 2015 Base FY 2016 Base FY 2017 Base 19,786, ,946,732 14,840,198 FY 2018 Base 0 7,029,307 1,405,861 5,623,446 Total $ 27,923,992 $ 7,029,307 $ 14,489,655 $ 20,463,644 Total $ 32,120,551 $ 37,819,081 $ 22,773,036 $ 47,166,596 Page 19

24 Protection Occupation - Deferred Outflows of Resources June 30, 2017 Additions Recognition June 30, 2018 (1) (2) (3) (4) = (1) + (2) - (3) Differences between expected and actual experience FY 2014 Base $ 0 $ 0 $ 0 $ 0 FY 2015 Base FY 2016 Base FY 2017 Base 1,077, , ,223 FY 2018 Base Total $ 1,077,897 $ 0 $ 250,674 $ 827,223 Changes of assumptions FY 2014 Base $ 0 $ 0 $ 0 $ 0 FY 2015 Base FY 2016 Base FY 2017 Base 46,592, ,835,577 35,757,406 FY 2018 Base Total $ 46,592,983 $ 0 $ 10,835,577 $ 35,757,406 Differences between projected and actual earnings FY 2014 Base $ 0 $ 0 $ 0 $ 0 FY 2015 Base 19,024, ,512,487 9,512,487 FY 2016 Base 43,328, ,442,698 28,885,398 FY 2017 Base FY 2018 Base Total $ 62,353,070 $ 0 $ 23,955,185 $ 38,397,885 Total $ 110,023,950 $ 0 $ 35,041,436 $ 74,982,514 Page 20

25 Protection Occupation - Deferred Inflows of Resources June 30, 2017 Additions Recognition June 30, 2018 (1) (2) (3) (4) = (1) + (2) - (3) Differences between expected and actual experience FY 2014 Base $ 2,102,766 $ 0 $ 1,642,788 $ 459,978 FY 2015 Base 1,588, , ,530 FY 2016 Base 623, , ,966 FY 2017 Base FY 2018 Base 0 1,141, , ,680 Total $ 4,314,979 $ 1,141,960 $ 2,749,785 $ 2,707,154 Changes of assumptions FY 2014 Base $ 50,202 $ 0 $ 39,222 $ 10,980 FY 2015 Base FY 2016 Base FY 2017 Base FY 2018 Base 0 1,584, ,110 1,284,472 Total $ 50,202 $ 1,584,582 $ 339,332 $ 1,295,452 Differences between projected and actual earnings FY 2014 Base $ 19,179,648 $ 0 $ 19,179,648 $ 0 FY 2015 Base FY 2016 Base FY 2017 Base 47,040, ,760,125 35,280,377 FY 2018 Base 0 17,142,351 3,428,470 13,713,881 Total $ 66,220,150 $ 17,142,351 $ 34,368,243 $ 48,994,258 Total $ 70,585,331 $ 19,868,893 $ 37,457,360 $ 52,996,864 Page 21

26 The following tables provide the collective Deferred Outflows of Resources and Deferred Inflows of Resources as of June 30, 2018 for the System in total (all membership groups). This table is provided for summary purposes only. The tables by membership group should be used when determining the proportionate share of the Deferred Outflows of Resources and Deferred Inflows of Resources for each participating employer, which will be provided by the Iowa Public Employees Retirement System. Deferred Outflows of Resources June 30, 2017 Additions Recognition June 30, 2018 (1) (2) (3) (4) = (1) + (2) - (3) Differences between expected and actual experience FY 2014 Base $ 13,154,081 $ 0 $ 10,276,629 $ 2,877,452 FY 2015 Base 21,965, ,719,455 12,246,514 FY 2016 Base FY 2017 Base 29,293, ,812,464 22,481,133 FY 2018 Base Total $ 64,413,647 $ 0 $ 26,808,548 $ 37,605,099 Changes of assumptions FY 2014 Base $ 53,415,180 $ 0 $ 41,730,611 $ 11,684,569 FY 2015 Base FY 2016 Base FY 2017 Base 1,162,333, ,310, ,023,300 FY 2018 Base 0 63,506,324 12,027,713 51,478,611 Total $ 1,215,748,571 $ 63,506,324 $ 324,068,415 $ 955,186,480 Differences between projected and actual earnings FY 2014 Base $ 0 $ 0 $ 0 $ 0 FY 2015 Base 398,993, ,496, ,496,913 FY 2016 Base 888,340, ,113, ,227,246 FY 2017 Base FY 2018 Base Total $ 1,287,334,694 $ 0 $ 495,610,535 $ 791,724,159 Total $ 2,567,496,912 $ 63,506,324 $ 846,487,498 $ 1,784,515,738 Page 22

27 Deferred Inflows of Resources June 30, 2017 Additions Recognition June 30, 2018 (1) (2) (3) (4) = (1) + (2) - (3) Differences between expected and actual experience FY 2014 Base $ 3,207,983 $ 0 $ 2,506,239 $ 701,744 FY 2015 Base 1,640, , ,827 FY 2016 Base 59,507, ,923,886 41,583,413 FY 2017 Base FY 2018 Base 0 131,727,462 24,948, ,779,079 Total $ 64,356,160 $ 131,727,462 $ 46,104,559 $ 149,979,063 Changes of assumptions FY 2014 Base $ 1,404,204 $ 0 $ 1,097,037 $ 307,167 FY 2015 Base FY 2016 Base FY 2017 Base FY 2018 Base 0 28,870,923 5,467,978 23,402,945 Total $ 1,404,204 $ 28,870,923 $ 6,565,015 $ 23,710,112 Differences between projected and actual earnings FY 2014 Base $ 413,177,161 $ 0 $ 413,177,161 $ 0 FY 2015 Base FY 2016 Base FY 2017 Base 948,572, ,143, ,429,179 FY 2018 Base 0 336,212,827 67,242, ,970,262 Total $ 1,361,749,399 $ 336,212,827 $ 717,562,785 $ 980,399,441 Total $ 1,427,509,763 $ 496,811,212 $ 770,232,359 $ 1,154,088,616 (h)(4) and (5) Changes in the employer s proportion and differences between the employer s contributions and the employer s proportionate share of contributions are considered Deferred Outflows of Resources and Deferred Inflows of Resources. In addition, any employer contributions subsequent to the Measurement Date are also Deferred Outflows of Resources. This information will be provided by the individual employers. (i) The following tables provide the Deferred Outflows of Resources and Deferred Inflows of Resources as of June 30, 2018 for the Regular Membership, Sheriffs and Deputies and Protection Occupation groups that will be recognized in PE in future years: Page 23

28 Year Ended June 30: Regular Membership Deferred Outflows of Resources Deferred Inflows of Resources Net Deferred Outflows/(Inflows) of Resources 2019 $758,111,882 $324,141,512 $433,970, ,400, ,141, ,259, ,293, ,426,126 (40,132,262) ,107,559 86,476,807 3,630, ,367,759 6,739,199 (3,371,440) Thereafter Year Ended June 30: Sheriffs and Deputies Deferred Outflows of Resources Deferred Inflows of Resources Net Deferred Outflows/(Inflows) of Resources 2019 $15,888,961 $13,252,661 $2,636, ,861,244 12,697,505 (836,261) ,770,153 12,346,381 (6,576,228) ,731,046 7,237,260 (5,506,214) ,632,789 (1,632,789) Thereafter Year Ended June 30: Protection Occupation Deferred Outflows of Resources Deferred Inflows of Resources Net Deferred Outflows/(Inflows) of Resources 2019 $35,041,436 $17,066,660 $17,974, ,528,951 16,075,630 9,453, ,086,251 15,765,121 (4,678,870) ,325,876 3,944,861 (618,985) ,592 (144,592) Thereafter Page 24

29 The following table provides a summary of the collective amounts reported as Deferred Outflows of Resources and Deferred Inflows of Resources to be recognized in PE in future years for all groups. This table is provided for informational purposes only. The tables by membership group should be used when determining the proportionate share of the Deferred Inflows and Outflows for each participating employer, which will be provided by the Iowa Public Employees Retirement System. Year Ended June 30: Deferred Outflows of Resources Deferred Inflows of Resources Net Deferred Outflows/(Inflows) of Resources 2019 $809,042,279 $354,460,833 $454,581, ,790, ,914, ,876, ,150, ,537,628 (51,387,360) ,164,481 97,658,928 (2,494,447) ,367,759 8,516,580 (5,148,821) Thereafter (j) There are no non-employer contributing entities at IPERS. Page 25

30 SECTION V REQUIRED SUPPLEMENTARY INFORMATION There are several tables of Required Supplementary Information (RSI) that need to be included in the System s financial statements: Paragraphs 81(a) and (b): This information will be provided by the Iowa Public Employees Retirement System Employer Self-Service through I-Que. Paragraph 82: Information about factors that significantly affect trends in the amounts reported in the schedules required by paragraph 81 should be presented as notes to the schedules. At this point, only five years are being reported in the Schedule of the Employer s Proportionate Share of the Net Pension Liability. Comments on additional years will be added as they occur. Employers should have the information available to report ten years in the Schedule of Employer Contributions. Changes of benefit and funding terms: The following changes were made by the Iowa Legislature and reflected in the valuation performed as of June 30 listed below: 6/30/2018 Valuation: None 6/30/2017 Valuation: None 6/30/2016 Valuation: None 6/30/2015 Valuation: None 6/30/2014 Valuation: None Changes in actuarial assumptions and methods: 6/30/2018 Valuation: Mortality assumption was changed to the family of RP-2014 Mortality Tables for all groups, with mortality improvements modeled using Scale MP Retirement rates for Regular members were lowered to better reflect actual experience. For the Sheriffs and Deputies, the retirement assumption was modified to reflect lower retirement rates at the younger ages. For the Protection Occupation group, the retirement rates were modified both higher and lower across the age ranges. Page 26

31 Disability rates were lowered for all groups to better reflect the actual experience. Termination rates for Regular members were adjusted to better reflect actual experience. Separate termination assumptions were adopted for the two Special Service groups and the assumptions were changed to be service-based rather than age-based. The probability of a vested member electing to receive a deferred benefit was adjusted for Regular members to better reflect actual experience. The merit component of the salary increase assumption was adjusted to better reflect actual salary increases. 6/30/2017 Valuation: The inflation assumption decreased from 3.00% to 2.60% per year. The assumed rate of interest on member accounts was decreased from 3.75% to 3.50% per year. The long-term rate of return assumption decreased from 7.50% to 7.00% per year. The wage growth and payroll growth assumption decreased from 4.00% to 3.25% per year. Salary increase assumption decreased by 0.75%. 6/30/2016 Valuation: None 6/30/2015 Valuation: None 6/30/2014 Valuation: The inflation assumption decreased from 3.25% to 3.00% per year. The assumed rate of interest on member accounts was decreased from 4.00% to 3.75% per year. Male mortality rates for Regular members were adjusted: o State males were changed to the RP-2000 Healthy Annuitant Table using generational mortality projections with no age adjustment. o School males were changed to the RP-2000 Healthy Annuitant Table using generational mortality projections with a 1-year age set back and rates decreased by 5% below age 75. o Other males were changed to the RP-2000 Healthy Annuitant Table using generational mortality projections with no age adjustment. Retirement rates were reduced for Sheriffs and Deputies between the ages of 55 and 64. Beginning June 30, 2014, the Amortization Method amortizes the June 30, 2014 UAL as a level percentage of payroll over a closed 30-year period. Each year thereafter, changes in the UAL will result in the establishment of new amortization bases. The future bases arising from plan experience will be amortized over a closed 20-year period beginning on the date the base is established. The amortization period for changes in the UAL due to plan amendments and assumption changes will be determined by the Investment Board at the time they occur. Page 27

32 APPENDIX A SCHEDULE OF CHANGES IN THE EMPLOYERS NET PENSION LIABILITY ALL MEMBERSHIP GROUPS Fiscal Year Ended June 30 Total Pension Plan Fiduciary Net Net Pension Liability Position Liability (a) (b) (a) (b) Balances at June 30, 2017 $37,440,382,029 $30,778,937,711 $6,661,444,318 Changes for the year: Service cost 862,716, ,716,803 Interest 2,548,179,239 2,548,179,239 Benefit term changes 0 0 Differences between expected and actual experience (131,727,462) (131,727,462) Assumption changes 34,635,401 34,635,401 Employer contributions 716,752,781 (716,752,781) Employee contributions including service purchases 486,035,402 (486,035,402) Net investment income, including net securities lending income 2,458,968,900 (2,458,968,900) Benefit payments, including member refunds (2,111,352,357) (2,111,352,357) 0 Administrative expenses (14,753,842) 14,753,842 Net changes 1,202,451,624 1,535,650,884 (333,199,260) Balances at June 30, 2018 $38,642,833,653 $32,314,588,595 $6,328,245,058 Page 28

33 APPENDIX A SCHEDULE OF CHANGES IN THE EMPLOYERS NET PENSION LIABILITY REGULAR MEMBERS Fiscal Year Ended June 30 Total Pension Plan Fiduciary Net Net Pension Liability Position Liability (a) (b) (a) (b) Balances at June 30, 2017 $35,176,950,577 $28,575,078,992 $6,601,871,585 Changes for the year: Service cost 785,381, ,381,044 Interest 2,393,568,949 2,393,568,949 Benefit term changes 0 0 Differences between expected and actual experience (127,082,069) (127,082,069) Assumption changes 63,506,324 63,506,324 Employer contributions 671,598,096 (671,598,096) Employee contributions including service purchases 452,000,035 (452,000,035) Net investment income, including net securities lending income 2,281,545,561 (2,281,545,561) Benefit payments, including member refunds (2,000,043,725) (2,000,043,725) 0 Administrative expenses (14,153,625) 14,153,625 Other changes (3,120,215) (3,120,215) 0 Net changes 1,112,210,308 1,387,826,127 (275,615,819) Balances at June 30, 2018 $36,289,160,885 $29,962,905,119 $6,326,255,766 Page 29

34 APPENDIX A SCHEDULE OF CHANGES IN THE EMPLOYERS NET PENSION LIABILITY SHERIFFS AND DEPUTIES Fiscal Year Ended June 30 Total Pension Plan Fiduciary Net Net Pension Liability Position Liability (a) (b) (a) (b) Balances at June 30, 2017 $691,205,752 $649,668,861 $41,536,891 Changes for the year: Service cost 18,996,673 18,996,673 Interest 47,259,726 47,259,726 Benefit term changes 0 0 Differences between expected and actual experience (3,503,433) (3,503,433) Assumption changes (27,286,341) (27,286,341) Employer contributions 10,564,954 (10,564,954) Employee contributions including service purchases 10,564,954 (10,564,954) Net investment income, including net securities lending income 52,219,974 (52,219,974) Benefit payments, including member refunds (32,686,442) (32,686,442) 0 Administrative expenses (113,406) 113,406 Other changes 3,353,475 3,353,475 0 Net changes 6,133,658 43,903,509 (37,769,851) Balances at June 30, 2018 $697,339,410 $693,572,370 $3,767,040 Page 30

35 APPENDIX A SCHEDULE OF CHANGES IN THE EMPLOYERS NET PENSION LIABILITY PROTECTION OCCUPATION Fiscal Year Ended June 30 Total Pension Plan Fiduciary Net Net Pension Liability Position Liability (a) (b) (a) (b) Balances at June 30, 2017 $1,572,225,700 $1,554,189,858 $18,035,842 Changes for the year: Service cost 58,339,086 58,339,086 Interest 107,350, ,350,564 Benefit term changes 0 0 Differences between expected and actual experience (1,141,960) (1,141,960) Assumption changes (1,584,582) (1,584,582) Employer contributions 34,589,731 (34,589,731) Employee contributions including service purchases 23,470,413 (23,470,413) Net investment income, including net securities lending income 125,203,365 (125,203,365) Benefit payments, including member refunds (78,622,190) (78,622,190) 0 Administrative expenses (486,811) 486,811 Other changes (233,260) (233,260) 0 Net changes 84,107, ,921,248 (19,813,590) Balances at June 30, 2018 $1,656,333,358 $1,658,111,106 ($1,777,748) Page 31