Arapahoe County Retirement Plan

Transcription

1 Arapahoe County Retirement Plan Update to the Board of County Commissioners Actuarial Valuation Results as of January 1, 2016 August 16, 2016 Leslie Thompson, FSA, FCA, EA, MAAA Paul Wood, ASA, FCA, MAAA Copyright 2016 GRS All rights reserved.

2 What s New Review of Valuation Results Where is the Plan Heading? GASB 67 and 68 2

3 Other happenings The County continues to hire 1, , , Payroll growth (one year): 1.2%: From increase in counts (1881 -> 1904) 6.3%: From increase in average pay ($56,993 -> $60,550) 7.5%: Total payroll growth Assume 3.25% More payroll to spread the unfunded liability over Liability losses (one year): Driven by salary increases that were greater than assumed Across the board salary increase January 1, 2016 Asset losses (one year): -1.3% ROR on a market value basis 5.3% on an actuarial value basis 3

4 Results, Funded Status Summary Funded Status Summary ($ in millions) Valuation Date January 1, 2016 January 1, 2015 Accrued Liability $427.1 $405.2 Actuarial Value of Assets (smoothed) Unfunded Accrued Liability $150.7 $135.8 Funded Ratio 64.73% 66.49% Market Value of Assets $263.5 $275.0 Unfunded Accrued Liability $163.6 $130.2 Funded Ratio 61.70% 67.87% 4

5 Results, Contribution Requirement Contribution Requirement Summary All Numbers Reported Middle of Year, Percent of Pay Fiscal Year Beginning January 1, 2016 January 1, 2015 Total Annual Required Contribution 19.52% 19.44% Estimated Member Contribution 8.00% 8.00% Net Annual Required Contribution 11.52% 11.44% Estimated County Contribution 8.00% 8.00% Contribution Shortfall 3.52% 3.44% 5

6 Contribution as % of Pay Local Peer Comparison Employer and Employee Contribution Rates 30% 20% 18% 18% 11% 10% 8% 9% 7% 12% 8% 21% 8% 7% 15% 0% 8% 9% 7% 8% 8% 8% 3% 5% 7% 8% 0% 11% Employee Contribution Rate Employer Contribution Rate Pueblo Water Works are the only plans without mandatory contributions to the retirement plan Average of peer group: employee contributions of 6.8%, employer contributions of 11.7% Colorado PERA does not participate in Social Security 6

7 Summary Asset and liability losses decreased the funded status and increased the contribution shortfall Deferred asset losses will put upward pressure on the required contribution rate Monitor improvement in funded progress Plan can no longer sustain adverse deviation and maintain an upward trajectory of funded ratio 7

8 8 Where is the Plan Heading?

9 Thirty Year Projection Current Design and Funding Policy Amortization Total Total of Unfunded Contribution Contribution Actual Valuation Accrued Actuarial Unfunded Funded Normal Liability Requirement Requirement Contribution Year Liability Value of Assets Liability Ratio Cost % % % $ Rate 2016 $ 427 $ 276 $ % 10.02% 9.50% 19.52% $ % % 9.90% 9.51% 19.41% % % 9.80% 9.63% 19.43% % % 9.71% 9.90% 19.61% % % 9.41% 10.07% 19.48% % % 9.23% 9.84% 19.07% % % 9.13% 9.48% 18.61% % % 9.08% 8.99% 18.07% % % 9.05% 8.38% 17.43% % Assumes 7.50% investment return on assets per year Funded ratio does not significantly grow over the next 30 years Contribution shortfalls relative to the current EE/ER contribution rates persist The Plan must rely on better than expected asset performance or contribution increases to get back on a trajectory to full funding 9

10 Thirty Year Projection What contribution rate is needed to get back to 90% funded ratio? Amortization Total Total of Unfunded Contribution Contribution Actual Valuation Accrued Actuarial Unfunded Funded Normal Liability Requirement Requirement Contribution Year Liability Value of Assets Liability Ratio Cost % % % $ Rate 2016 $ 427 $ 276 $ % 10.02% 9.50% 19.52% $ % % 9.90% 9.51% 19.41% % % 9.80% 9.63% 19.43% % % 9.71% 9.77% 19.48% % % 9.41% 9.19% 18.60% % % 9.23% 8.05% 17.28% % % 9.13% 6.58% 15.71% % % 9.08% 4.73% 13.81% % % 9.05% 2.46% 11.51% % Assumes 7.50% investment return on assets per year Assumes 8.90% contribution rate by County and employees starting in 2018 Funded ratio reaches 90% in

11 11 GASB 68

12 GASB 68 GASB 68 replaces GASB 27 for the County year end 12/31/2015 Previously reported Net Pension Obligation Now report Net Pension Liability bigger and more volatile County Reporting Date Accounting Standard Measure Reported Liability on County's Books ($ in millions) December 31, 2014 GASB 27 Net Pension Obligation $38.2 December 31, 2015 GASB 68 Net Pension Liability $129.7 December 31, 2016 GASB 68 Net Pension Liability $

13 GASB 67 and 68 Special GASB prescribed projection used to determine discount rate assumption used Able to use 7.50% for both reporting years under GASB 68 so far Arapahoe County is on the cusp of having to use a lower rate Any further adverse experience could result in a discount rate lower then 7.50% Would increase the reported obligation further 13