Termination, Retirement and SMP Experience Study for the Public Service Pension Plan

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1 Termination, Retirement and SMP Experience Study for the Public Service Pension Plan June 2015 Risk. Reinsurance. Human Resources

2 Table of Contents Executive Summary... 1 Section 1: Introduction... 2 Section 2: Termination Rates... 5 Section 3: Retirement Rates Section 4: Seniority, Merit and Promotion Rates Appendix A: Current and Proposed Termination Rate Assumptions Appendix B: Current and Proposed Retirement Rate Assumptions Appendix C: Seniority, Merit and Promotion Rate Assumptions Appendix D: Overview of the 2014 Mortality Study Aon Hewitt 2015 Aon Hewitt Inc. All Rights Reserved. This document contains confidential information and trade secrets protected by copyrights owned by Aon Hewitt. The document is intended to remain strictly confidential and to be used only for your internal needs and only for the purpose for which it was initially created by Aon Hewitt. No part of this document may be disclosed to any third party or reproduced by any means without the prior written consent of Aon Hewitt Aon Consulting Inc All Rights Reserved

3 Executive Summary Aon Hewitt has been engaged by the Public Service Pension Board ( PSP Board ) to perform an actuarial study of the experience of the (the PSPP ) in respect of, termination rates, retirement rates and seniority/merit/promotion increases. This experience study, together with the 2014 study conducted in relation to the PSPP s mortality experience, provides: important insight into how the PSPP s demographic experience is trending; and proposals for updates to the major demographic assumptions (i.e. mortality, termination, retirement and seniority/merit/promotion) that should be made for future actuarial valuations, notably the December 31, 2014 actuarial valuation. This report focuses on the study conducted on the PSPP s termination, retirement and seniority/merit/promotion rates and summarizes the results and recommendations forthcoming from the analysis. Overall, we are proposing changes to the PSPP s termination, retirement and seniority/merit/promotion rates as follows: minor refinements to the termination rates combined with a strengthening of the proportion of terminating members who elect a commuted value; minor refinements to retirement rates for members who retire on or before their earliest unreduced retirement date combined with extending retirement rates to age 70 and a corresponding reduction in retirement rates following the earliest unreduced retirement date; minor refinements to seniority/merit/promotion increases prior to age 35 combined with a reduction in rates between 35 and 48 and an increase in rates from 48 to age 55. The combined impact on PSPP funding at December 31, 2013 of adopting these new rates would have been as follows: accrued liabilities decrease by $32 million; and current service cost increases by approximately $5.3 million For reference, an overview of the key results and recommendations of the mortality experience study conducted in 2014 is included as Appendix D. Respectfully Submitted Donald L. Ireland, FSA, FCIA Partner Aon Consulting Inc All Rights Reserved 1

4 Section 1: Introduction Purpose Aon has been engaged by the PSP Board to conduct a study of experience rates for the PSPP. The purposes of the study are: to determine the actual rates of termination of employment, retirement and increase in pensionable earnings due to seniority, merit and promotion ("SMP") that have been experienced by plan members; to compare these actual rates with the corresponding actuarial valuation assumptions, and to recommend changes, if any, that should be made for future valuation assumptions. While the assumptions as to rates of termination, retirement and SMP affect the actuarial valuation, the actual cost of a pension plan is not determined by the actuarial assumptions. Rather, the actuarial assumptions are simply an estimate of the future experience of the plan. The plan's future experience will determine the actual cost of the plan. Data In order to conduct the study, relevant member data as at December 31 for years from 2002 through 2013 were assembled. This data was obtained as at each December 31 from the PSPP's administrator, Alberta Pension Services Corporation ("APSC"), and compiled annually. The data were reviewed for completeness and were found generally to be acceptable and appropriate for the purposes of this study. Aon Consulting Inc All Rights Reserved 2

5 Experience Rates Termination and Retirement In developing termination and retirement experience rates, it is necessary to determine both the age at which each decrement occurs, as well as the total number of members who are exposed to the risk of decrement for that age for the entire period of the study. For each age, the experience rate is equal to the total number of decrements at that age, divided by the total exposure to that decrement at that age. The exposure is the total number of participants subject to the particular decrement for a given age. Valuation data as at December 31 for each of years 2002 through 2013 were used. Consistent with our actuarial valuation methodology, the age of each active member at each valuation date is determined as the member's nearest integral age at the applicable year-end date. Accordingly, an individual whose actual age is between and is deemed to be age 52 (this is called "age nearest birthday"). Should that individual terminate in the next year, he / she is considered to be a termination at age 52 (the integral age at the beginning of the calendar year). The exposure for age 52 for this individual is set at 1.0 full year, regardless of whether he/she terminates during the year. The experience termination rates that result are then directly comparable to the valuation actuarial assumptions for termination rates, as they are also based on the age nearest birthday method and are applied at the beginning of each year. Termination exposure, expected terminations and actual terminations for each age are tracked separately by gender and by each of the first five years of PSPP service, consistent with the actuarial valuation assumptions. The same methods are used for retirement rates. Retirement exposure, expected retirements and actual retirements for each age are tracked separately by gender and by years of PSPP service. Aon Consulting Inc All Rights Reserved 3

6 Experience Rates Seniority, Merit and Promotion In order to determine the experience rates of pensionable earnings adjustments for seniority, merit and promotion (SMP), we worked from the premise that the rates are directly related to attained age (calculated as age nearest birthday), which is consistent with the basic assumption underlying the SMP rates used in the valuation. For each of the year-ends from 2002 to 2013, we calculated the average pensionable earnings paid for all members at a given age. For members with less than a full year of service in any year, their reported pensionable earnings were annualized before calculating the averages. Members with no pensionable earnings were excluded from the study. The rate of increase for seniority, merit and promotion for any given age is determined as the average pensionable earnings at the next age divided by the average pensionable earnings at the given age, all within the same year-end, converted to a percentage increase or decrease. The resulting experience rates for each yearend were then averaged to obtain experience rates over the duration of the study, and these averaged rates were compared to the valuation assumption. Aon Consulting Inc All Rights Reserved 4

7 Section 2: Termination Rates The current valuation assumption uses separate termination rates by gender. These rates also use a 5-year select period, meaning that separate rates apply at a particular age for each of the first 5 years of PSPP service while the ultimate (i.e. for service over 5 years) rates are based only on age. Termination Data For purposes of the study, terminations were determined as those participants under the age of 55 whose status changed from active or suspended (i.e., with Combined Pensionable Service -CPS) at the beginning of the year, to deferred, hold-on-deposit (HOD) or paid-out during the year. Furthermore: termination does not include any participant who left active status at age 55 or older; and members whose subsequent year s status was unknown were presumed to be terminations -- this may include some members who died in service. Termination Experience For reviewing termination experience, the primary focus is the seven-year period 2007 through Experience across the full data set (i.e through 2013) was also examined to further validate trends that have emerged since the last termination experience study (which covered the seven-year period 2003 through 2009) was performed. The following table summarizes the actual number of terminations during the study period and the number expected based on the valuation assumption. Period Actual Expected Actual-to-Expected Male 6,743 6, % Female 16,479 15, % Total 23,222 21, % Male 9,740 9, % Female 23,409 22, % Total 33,149 31, % Aon Consulting Inc All Rights Reserved 5

8 Overall, actual termination rates have slightly exceeded the assumed rate over the period 2007 to 2013 as illustrated by actual-to-expected ratios that exceed 100%. By comparing the results to the period 2003 to 2013, the trend towards higher termination rates in recent years is evident. Female Rates The graphs on the following pages compare in detail the actual female termination rates with the valuation rates for the period 2007 to The graphs also indicate the proposed changes to the current assumption (the red line). The general observations from these graphs and the analysis conducted are as follows: For all service cohorts, across virtually all ages, the actual termination rates have exceeded the valuation rates. The most significant overall underestimation rests with the shorter service cohorts; however, for the 3-4 and 4-5 year service cohorts, a noticeable underestimation is observed across most ages 40 through 50. Goodness of fit tests designed to statistically validate the extent to which the current assumption reflects the actual rates have produced mixed results by both age and service. These results would suggest that refinements to the current assumption would improve the fit of the assumption to the actual experience. The proposed changes to the current assumption align better with the actual experience as illustrated in the graphs and significantly improve the goodness of fit tests that have been applied for virtually all ages and service cohorts. Aon Consulting Inc All Rights Reserved 6

9 Graph 1 35% 30% 25% Female Termination Rates Service: Less than 1 Year Experience Changes to Current Assumption Current Assumption Rates 20% 15% 10% 5% 0% Age Graph 2 Aon Consulting Inc All Rights Reserved 7

11 Graph 5 Graph 6 The following table compares the actual-to-expected ratios for each of the female service cohorts and select age groups. As can be seen from this table, the actual-to-expected ratio under the proposed assumption (labelled P in the table) moves closer to 100% in most instances compared to the current assumption (labelled C in the table). As a result, the proposed assumption provides a better fit between the assumption and actual experience. Aon Consulting Inc All Rights Reserved 9

12 Age Cohort Total Service <1 C 106% 121% 131% 122% 129% 138% 140% 123% P 106% 102% 111% 109% 107% 107% 109% 106% 1-2 C 107% 119% 125% 136% 121% 117% 108% 119% P 107% 105% 111% 109% 103% 101% 108% 106% 2-3 C 108% 111% 111% 110% 114% 124% 122% 113% P 108% 104% 103% 101% 114% 111% 122% 106% 3-4 C 116% 121% 109% 124% 143% 146% 132% 123% P 111% 112% 109% 113% 100% 115% 132% 111% 4-5 C 97% 112% 103% 102% 145% 158% 135% 117% P 97% 112% 103% 102% 109% 119% 102% 107% >=5 C 91% 120% 103% 118% 130% 110% 105% 112% P 91% 120% 103% 108% 114% 110% 105% 108% Total C 107% 118% 113% 119% 128% 121% 112% 117% P 107% 106% 107% 107% 109% 109% 108% 108% Male Rates The graphs on the following pages compare in detail the actual male termination rates with the valuation rates for the period 2007 to The graphs also indicate the proposed changes to the current assumption (the red line). The general observations from these graphs and the analysis conducted are as follows: For service cohorts other than service between four and five years and across virtually all ages, the actual termination rates have exceeded the valuation rates. For the service cohort between four and five years, the actual termination rates have aligned quite well with the current valuation assumption. Overall, the actual termination rates for males are more closely aligned with the current valuation assumption than that observed for females. Goodness of fit tests designed to statistically validate the extent to which the current assumption reflects the actual rates suggest that only minor refinements are required to the current valuation rates. Aon Consulting Inc All Rights Reserved 10

16 The following table compares the actual-to-expected ratios for each of the male service cohorts and select age groups. As can be seen from this table, the actual-to-expected ratio under the proposed assumption (labelled P in the table) moves closer to 100% in most instances compared to the current assumption (labelled C in the table). As a result, the proposed assumption provides a better fit between the assumption and actual experience. Age Cohort Total Service <1 C 101% 114% 129% 118% 129% 134% 146% 118% P 101% 97% 115% 104% 113% 134% 146% 107% 1-2 C 101% 104% 98% 103% 104% 121% 122% 104% P 101% 104% 98% 103% 104% 111% 111% 103% 2-3 C 102% 117% 114% 114% 113% 115% 152% 116% P 94% 104% 105% 114% 113% 115% 152% 108% 3-4 C 161% 132% 101% 100% 115% 118% 121% 114% P 161% 121% 101% 100% 93% 118% 121% 109% 4-5 C 254% 148% 106% 89% 116% 163% 103% 119% P 254% 148% 106% 89% 116% 163% 103% 119% >=5 C 101% 112% 86% 110% 110% 114% 118% 108% P 101% 112% 98% 110% 110% 114% 118% 111% Total C 105% 115% 103% 107% 113% 121% 122% 111% P 104% 107% 103% 105% 109% 119% 121% 108% Lump Sum Settlement vs. Deferred Pension Experience As part of the analysis of termination rates, the experience of members electing a lump sum settlement versus a deferred pension on termination was also examined. Given the current low interest rate environment, a higher proportion of members electing a lump sum settlement on termination will result in an increase in liabilities. The current assumption is based on rates that vary by service (80% of members with less than five years of service are assumed to elect a lump sum settlement while 50% of members with five or more years of service are assumed to elect a lump sum settlement). Our review of the experience concluded that a service-based assumption continues to provide the best fit to the actual experience. Aon Consulting Inc All Rights Reserved 14

17 Based on the experience over the period 2007 through 2013, the following graph illustrates the proportion of members electing a lump sum settlement. The increased trend of members electing a lump sum settlement is undeniable and likely driven by the low interest rate environment over the period of the study. Graph 13 Recommendation Termination Rates Based on the results of the experience study, it is recommended that the current valuation rates be changed to the proposed rates shown in the tables in Appendix A. These proposed rates would be considered as best estimate. Proportion Electing a Lump Sum Settlement Over the period 2007 through 2013, it is evident that a greater proportion of members are opting for a lump sum settlement over a deferred pension. Given the current low interest rates used to calculate lump sum settlements, lump sum settlement values will generally be higher than the going-concern value of the deferred pension option. Consequently, the proportion of members electing a lump sum settlement should be increased to reflect actual experience more closely. In the future, should interest rates rise and the value of lump sum settlements decline, this trend could reverse itself and an adjustment to the proportion electing a Aon Consulting Inc All Rights Reserved 15

18 lump sum settlement would change. For now, however, we would recommend the following assumption for the proportion electing a lump sum settlement: Years of Service at Termination Proportion Assumed to Elect a Lump Sum Settlement Less than 5 80% Between 5 and 15 50% Between 15 and 20 60% Between 20 and 25 70% More than 25 75% Effect on Valuation Results Applying the proposed rates in place of the current termination rates, as well as updating the assumption regarding election of lump sum settlements, would have had the following effects on PSPP funding valuation results at December 31, 2013: accrued liabilities increase by approximately $45 million most of which is attributed to the proposed change in the proportion electing a lump sum settlement; and current service cost increases approximately $2 million or approximately 0.08% of pensionable earnings. Aon Consulting Inc All Rights Reserved 16

19 Section 3: Retirement Rates Retirement Data For purposes of the study, retirements were determined as those participants (including CPS members) who retired from active service. Retirements during each year were identified by using the retirement date in the pensioner data. Retirement Experience For reviewing retirement experience, the primary focus is the seven-year period 2007 through Experience across the full data set (i.e through 2013) was also examined to further validate trends that have emerged since the last retirement experience study (which covered the seven-year period 2003 through 2009) was performed. Generally, the actual retirement rates are observed to vary significantly by gender, age and service. The analysis examined retirement rates by these three variables based on: measuring the actual number of retirements at each gender / age / service combination against that assumed by the current retirement assumption; assessing the significance of the observed differences between actual and expected experience; and identifying adjustments to the current assumption that would improve the goodness of fit of the retirement assumption to actual experience. Consistent with the structure of the current retirement assumption, the analysis confirmed three distinct levels of retirement rates: generally lower levels for periods prior to members earliest unreduced retirement date; increased levels at the time the earliest unreduced retirement date is reached with a particular spike in retirement rates at age 65; and further increased levels after members have reached their earliest unreduced retirement date. Aon Consulting Inc All Rights Reserved 17

20 For purposes of presentation, the results of the analysis have been aggregated into these three categories. The analysis and resulting proposed assumption, however, is built on a more comprehensive examination of retirement rates across the full spectrum of the gender, age and service variables. As such, in some limited instances, the fit of the current assumption may not appear optimal when only the aggregate data is examined. Female Rates The graphs on the following pages compare the actual female retirement rates with the current valuation rates for the period 2007 to The graphs also indicate the proposed changes to the current assumption. The general observations from these graphs and the analysis conducted are as follows: Graph 14: The actual-to-expected ratios have generally been less than 100% (meaning members are retiring later than assumed) across most age and service cohorts. Graph 15: When the difference between the actual and assumed retirements is examined, however, the difference between actual and expected experience is not overly significant. The noticeable exception being for members upon reaching their earliest unreduced retirement date between ages 62 and 65 for whom actual retirement rates are materially lower than expected. This observation, combined with no apparent trend towards retiring before the earliest unreduced date, suggests that members are delaying retirement beyond that assumed by the current assumption. Graph 16: Of particular note is a material delay in retirement beyond age 65. Under the current assumption, if members have not retired before age 65, they are assumed to retire at 65. Graphs 17, 18 and 19: The primary adjustments to the current retirement assumption being proposed would result in relatively minor refinements to the current assumption prior to age 63 with reduced retirement rates thereafter to reflect actual experience. In any event, members are assumed to retire no later than age 70. While not captured explicitly in the graphs, the current retirement assumption assumes that members will retire regardless of age once they have accrued 36 years of eligible service. While there is experience to suggest that some members retire with more than 36 years of eligibility service, the volume of experience is limited and likely attributed to individuals who have earned less than 35 years of pensionable service. For this reason, the current assumption of 100% retirement once 36 years of eligibility service is attained was maintained. Aon Consulting Inc All Rights Reserved 18

24 Male Rates The graphs on the following pages compare the actual male retirement rates with the current valuation rates for the period 2007 to The graphs also indicate the proposed changes to the current assumption. The general observations from these graphs and the analysis conducted are as follows: Graph 20: The actual-to-expected ratios have generally been less than 100% (meaning members are retiring later than assumed) across most age and service cohorts. The differences; however, are not as pronounced as for female members. Graph 21: When the difference between the actual and assumed retirements is examined, however, the difference between actual and expected experience is not overly significant. Graph 22: Consistent with female retirement rates, there is a noticeable delay in retirement beyond age 65 for males. Graphs 23, 24 and 25: The primary adjustments to the current retirement assumption being proposed would result in relatively minor refinements to the current assumption prior to age 63 with reduced retirement rates thereafter to reflect actual experience. In any event, members are assumed to retire no later than age 70. While not captured explicitly in the graphs, the current retirement assumption assumes that members will retire regardless of age once they have accrued 36 years of eligible service. While there is experience to suggest that some members retire with more than 36 years of eligibility service, the volume of experience is limited and likely attributed to individuals who have earned less than 35 years of pensionable service. For this reason, the current assumption of 100% retirement once 36 years of eligibility service is attained was maintained. Aon Consulting Inc All Rights Reserved 22

28 Recommendation Based on the results of the experience study, we propose that adjustments be made to the current retirement assumption as set out in the tables in Appendix B. These adjustments have been derived based on their ability to improve the fit of the assumption to the actual experience as well as to maintain a reasonably smooth progression of retirement rates across age and service cohorts. Applying the proposed rates in place of the current rates would have had the following effects on PSPP funding valuation results at December 31, 2013: accrued liabilities decrease by approximately $88 million; and current service cost increases by approximately $2.9m or approximately 0.12% of pensionable earnings. The increase in current service cost is attributed to a large number of older members who, under the proposed assumption, are assumed to retire later and hence earn service throughout a greater proportion of the year following the valuation date. The additional service that is expected to be accrued by these individuals more than offsets the marginal decline in current service cost for younger members that is realized by changing assumptions. Aon Consulting Inc All Rights Reserved 26

29 Section 4: Seniority, Merit and Promotion Rates Seniority, Merit and Promotion (SMP) increases represent increases in pensionable earnings that are in addition to general wage increases that reflect inflation and productivity. The current valuation SMP assumption is comprised of declining rates by age until age 55 at which time SMP increases are assumed to be nil. Actual experience would tend to suggest that SMP increases after age 54 are negative; however, after the earliest retirement eligibility date, membership movements can lead to a distortion in the actual SMP rates. For that reason, SMP rates after age 54 have been set to nil. SMP Data For purposes of the study, SMP rates were determined from the pensionable earnings data for active members (including CPS members) at December 31, 2007 through This data was then stratified by age. SMP Experience For reviewing the SMP experience, the primary focus is the seven-year period 2007 through Experience across the full data set (i.e through 2013) was also examined to further validate trends that have emerged since the last SMP experience study (which covered the period 2003 through 2009) was performed. Generally, the actual SMP rates observed were reasonably well represented by the current SMP assumption for ages up to and including age 35. After age 35, however, a general downward shift in SMP rates compared to the previous experience study is observed for ages 36 through 47 and a gradual upward shift after age 48. Consequently, we have constructed a new SMP assumption to reflect this trend and improve the overall fit of the experience to the assumption. The following graphs illustrate the average experience rates by age compared to the current assumption and the proposed assumption. Aon Consulting Inc All Rights Reserved 27

31 Graph 28 Recommendations Based on the results of the experience analysis, we recommend that the alternative SMP rates as set out in Appendix C be adopted for PSPP valuations. Applying the proposed rates in place of the current rates would have had the following effects on PSPP funding valuation results at December 31, 2013: accrued liabilities increase approximately $11 million; current service cost increases approximately $0.4 million or approximately 0.02% of pensionable earnings. Aon Consulting Inc All Rights Reserved 29

32 Appendix A: Current and Proposed Termination Rate Assumptions Less than 1 yr service Current Female Termination Rates At least 1 but not 2 yrs service At least 2 but not 3 yrs service Service At least 3 but not 4 yrs service At least 4 but not 5 yrs service At least 5 yrs service Age <21 25% 24% 17% 14% 11% 10% 21 25% 23% 17% 14% 11% 10% 22 25% 22% 17% 14% 11% 10% 23 25% 21% 16% 14% 11% 10% 24 25% 20% 15% 12% 11% 10% 25 20% 19% 14% 12% 11% 9% 26 19% 18% 14% 12% 11% 9% 27 18% 17% 14% 12% 11% 9% 28 18% 16% 14% 12% 11% 9% 29 18% 15% 14% 12% 11% 9% 30 17% 15% 13% 11% 11% 8% 31 17% 15% 13% 11% 11% 8% 32 17% 14% 13% 11% 11% 8% 33 17% 13% 13% 11% 11% 8% 34 17% 12% 13% 11% 11% 8% 35 16% 12% 12% 10% 9% 6% 36 16% 12% 12% 10% 9% 6% 37 16% 12% 12% 10% 9% 6% 38 16% 12% 12% 10% 9% 6% 39 16% 12% 12% 10% 9% 6% 40 15% 12% 10% 7% 6% 4% 41 15% 12% 10% 7% 6% 4% 42 15% 12% 10% 7% 6% 4% 43 15% 12% 10% 7% 6% 4% 44 15% 12% 10% 7% 6% 4% 45 14% 12% 9% 7% 6% 4% 46 14% 12% 9% 7% 6% 4% 47 14% 12% 9% 7% 6% 4% 48 14% 12% 9% 7% 6% 4% 49 14% 12% 9% 7% 6% 4% 50 14% 12% 8% 7% 6% 4% 51 14% 12% 8% 7% 6% 4% 52 14% 12% 8% 7% 6% 4% 53 14% 12% 8% 7% 6% 4% 54 14% 12% 8% 7% 6% 4% Aon Consulting Inc All Rights Reserved 30

33 Less than 1 yr service Current Male Termination Rates Service At least 1 At least 2 At least 3 At least 4 but not 2 but not 3 but not 4 but not 5 yrs yrs yrs yrs service service service service At least 5 yrs service Age <21 27% 26% 20% 12% 10% 9% 21 27% 26% 20% 12% 10% 9% 22 27% 25% 20% 12% 10% 9% 23 27% 20% 15% 12% 10% 9% 24 27% 20% 15% 12% 10% 9% 25 21% 20% 15% 11% 9% 8% 26 20% 20% 15% 11% 9% 8% 27 19% 20% 15% 11% 9% 8% 28 19% 18% 15% 11% 9% 8% 29 19% 18% 12% 11% 9% 8% 30 16% 16% 12% 11% 9% 8% 31 16% 16% 12% 11% 9% 8% 32 16% 16% 12% 11% 9% 8% 33 16% 16% 12% 11% 9% 8% 34 16% 16% 12% 11% 9% 8% 35 14% 13% 10% 9% 9% 5% 36 14% 13% 10% 9% 9% 5% 37 14% 13% 10% 9% 9% 5% 38 14% 13% 10% 9% 9% 5% 39 14% 13% 10% 9% 9% 5% 40 14% 12% 8% 7% 7% 4% 41 14% 12% 8% 7% 7% 4% 42 14% 12% 8% 7% 7% 4% 43 14% 12% 8% 7% 7% 4% 44 14% 12% 8% 7% 7% 4% 45 11% 11% 7% 7% 6% 3% 46 11% 11% 7% 7% 6% 3% 47 11% 11% 7% 7% 6% 3% 48 11% 11% 7% 7% 6% 3% 49 11% 11% 7% 7% 6% 3% 50 11% 10% 7% 6% 5% 3% 51 11% 10% 7% 6% 5% 3% 52 11% 10% 7% 6% 5% 3% 53 11% 10% 7% 6% 5% 3% 54 11% 10% 7% 6% 5% 3% Aon Consulting Inc All Rights Reserved 31

34 Less than 1 yr Proposed Female Termination Rates Service At least 1 but not 2 yrs At least 2 but not 3 yrs At least 3 but not 4 yrs At least 4 but not 5 yrs Age <21 25% 23% 17% 14% 11% 10% 21 25% 23% 17% 14% 11% 10% 22 25% 22% 17% 14% 11% 10% 23 25% 21% 16% 14% 11% 10% 24 25% 20% 15% 13% 11% 10% 25 24% 20% 15% 13% 11% 9% 26 23% 20% 15% 13% 11% 9% 27 22% 20% 15% 13% 11% 9% 28 21% 19% 15% 13% 11% 9% 29 20% 18% 15% 13% 11% 9% 30 20% 17% 14% 11% 11% 8% 31 20% 16% 14% 11% 11% 8% 32 20% 15% 14% 11% 11% 8% 33 20% 15% 14% 11% 11% 8% 34 20% 15% 14% 11% 11% 8% 35 18% 15% 13% 11% 9% 7% 36 18% 15% 13% 11% 9% 7% 37 18% 15% 13% 11% 9% 7% 38 18% 15% 13% 11% 9% 6% 39 18% 15% 13% 11% 9% 6% 40 18% 14% 10% 10% 8% 5% 41 18% 14% 10% 10% 8% 5% 42 18% 14% 10% 10% 8% 5% 43 18% 14% 10% 10% 8% 4% 44 18% 14% 10% 10% 8% 4% 45 18% 14% 10% 10% 8% 4% 46 18% 14% 10% 10% 8% 4% 47 18% 14% 10% 10% 8% 4% 48 18% 14% 10% 7% 8% 4% 49 18% 14% 10% 7% 8% 4% 50 18% 12% 8% 7% 8% 4% 51 18% 12% 8% 7% 8% 4% 52 18% 12% 8% 7% 8% 4% 53 18% 12% 8% 7% 8% 4% 54 18% 12% 8% 7% 8% 4% At least 5 yrs Aon Consulting Inc All Rights Reserved 32

35 Less than 1 yr Proposed Male Termination Rates At least 1 but not 2 yrs At least 2 but not 3 yrs At least 3 but not 4 yrs At least 4 but not 5 yrs Age <21 27% 26% 20% 12% 10% 9% 21 27% 26% 20% 12% 10% 9% 22 27% 25% 20% 12% 10% 9% 23 27% 20% 17% 12% 10% 9% 24 27% 20% 17% 12% 10% 9% 25 25% 20% 17% 12% 9% 8% 26 24% 20% 17% 12% 9% 8% 27 23% 20% 17% 12% 9% 8% 28 22% 18% 17% 12% 9% 8% 29 21% 18% 13% 12% 9% 8% 30 18% 16% 13% 11% 9% 7% 31 18% 16% 13% 11% 9% 7% 32 18% 16% 13% 11% 9% 7% 33 18% 16% 13% 11% 9% 7% 34 18% 16% 13% 11% 9% 7% 35 16% 13% 10% 9% 9% 5% 36 16% 13% 10% 9% 9% 5% 37 16% 13% 10% 9% 9% 5% 38 16% 13% 10% 9% 9% 5% 39 16% 13% 10% 9% 9% 5% 40 16% 12% 8% 9% 7% 4% 41 16% 12% 8% 9% 7% 4% 42 16% 12% 8% 9% 7% 4% 43 16% 12% 8% 9% 7% 4% 44 16% 12% 8% 7% 7% 4% 45 11% 12% 7% 7% 6% 3% 46 11% 12% 7% 7% 6% 3% 47 11% 12% 7% 7% 6% 3% 48 11% 12% 7% 7% 6% 3% 49 11% 12% 7% 7% 6% 3% 50 11% 11% 7% 6% 5% 3% 51 11% 11% 7% 6% 5% 3% 52 11% 11% 7% 6% 5% 3% 53 11% 11% 7% 6% 5% 3% 54 11% 11% 7% 6% 5% 3% At least 5 yrs Aon Consulting Inc All Rights Reserved 33

36 Appendix B: Current and Proposed Retirement Rate Assumptions Current Female Retirement Rates Age Service % 3.0% 3.0% 3.5% 5.5% 8.0% 6.5% 6.5% 7.5% 19.0% 3 3.5% 3.0% 3.0% 4.0% 5.5% 8.5% 6.5% 6.5% 7.5% 19.0% 4 3.5% 3.0% 3.0% 4.0% 5.5% 8.5% 6.5% 6.5% 7.5% 19.5% 5 3.5% 3.0% 3.0% 4.0% 5.5% 8.5% 6.5% 6.5% 8.0% 19.5% 6 3.5% 3.0% 3.0% 4.0% 5.5% 8.5% 7.0% 7.0% 8.0% 20.0% 7 4.0% 3.0% 3.0% 4.0% 5.5% 9.0% 7.0% 7.0% 8.0% 20.5% 8 4.0% 3.0% 3.5% 4.0% 6.0% 9.0% 7.0% 7.0% 8.0% 20.5% 9 4.0% 3.5% 3.5% 4.0% 6.0% 9.0% 7.0% 7.0% 8.5% 21.0% % 3.5% 3.5% 4.0% 6.0% 9.5% 7.0% 7.0% 8.5% 21.0% % 3.5% 3.5% 4.5% 6.0% 9.5% 7.5% 7.5% 8.5% 21.5% % 3.5% 3.5% 4.5% 6.0% 9.5% 7.5% 7.5% 8.5% 21.5% % 3.5% 3.5% 4.5% 6.0% 9.5% 7.5% 7.5% 9.0% 22.0% % 3.5% 3.5% 4.5% 6.5% 10.0% 7.5% 7.5% 9.0% 22.5% % 3.5% 3.5% 4.5% 6.5% 10.0% 7.5% 7.5% 9.0% 22.5% % 3.5% 3.5% 4.5% 6.5% 10.0% 8.0% 8.0% 9.0% 23.0% % 3.5% 4.0% 4.5% 6.5% 10.0% 8.0% 8.0% 9.0% 23.0% % 3.5% 4.0% 4.5% 6.5% 10.5% 8.0% 8.0% 9.5% 23.5% % 4.0% 4.0% 5.0% 7.0% 10.5% 8.0% 8.0% 9.5% 23.5% % 4.0% 4.0% 5.0% 7.0% 10.5% 8.5% 8.0% 9.5% 24.0% % 4.0% 4.0% 5.0% 7.0% 10.5% 8.5% 8.0% 9.5% 52.5% % 4.0% 4.0% 5.0% 7.0% 11.0% 8.5% 8.5% 27.0% 35.5% % 4.0% 4.0% 5.0% 7.0% 11.0% 8.5% 16.0% 8.5% 36.0% % 4.0% 4.0% 5.0% 7.0% 11.0% 23.5% 11.5% 11.5% 36.5% % 4.0% 4.0% 5.0% 7.5% 24.5% 10.0% 10.0% 10.5% 37.0% % 4.0% 4.0% 5.0% 11.0% 11.0% 11.0% 11.0% 11.0% 37.0% % 4.0% 4.5% 10.0% 10.0% 10.5% 10.0% 10.5% 10.5% 37.5% % 4.0% 12.0% 12.5% 13.0% 13.5% 13.0% 13.5% 13.5% 38.0% % 12.5% 12.5% 12.5% 13.0% 13.5% 13.0% 13.5% 13.5% 38.5% % 13.5% 13.5% 13.5% 14.0% 14.5% 14.0% 14.5% 14.5% 39.0% % 14.5% 14.5% 14.5% 15.0% 16.0% 15.0% 15.5% 15.5% 39.5% % 13.0% 13.0% 13.5% 13.5% 14.5% 14.0% 14.0% 14.0% 39.5% % 12.5% 12.5% 13.0% 13.0% 13.5% 13.0% 13.5% 13.5% 40.0% % 10.0% 10.0% 10.0% 10.0% 11.0% 10.5% 10.5% 10.5% 40.5% % 19.0% 19.0% 19.5% 19.5% 20.5% 20.0% 20.0% 20.5% 41.0% Rates are set at 100% for ages over 64 years and for service over 35 years. Green shading indicates exactly 85 points. Aon Consulting Inc All Rights Reserved 34

37 Current Male Retirement Rates Age Service % 3.5% 3.5% 3.5% 4.5% 6.5% 5.5% 6.5% 6.5% 14.5% 3 3.5% 3.5% 3.5% 3.5% 4.5% 6.5% 6.0% 6.5% 6.5% 15.0% 4 3.5% 3.5% 3.5% 3.5% 5.0% 6.5% 6.0% 6.5% 6.5% 15.0% 5 3.5% 3.5% 3.5% 3.5% 5.0% 6.5% 6.0% 6.5% 6.5% 15.0% 6 3.5% 3.5% 3.5% 4.0% 5.0% 6.5% 6.0% 6.5% 6.5% 15.5% 7 3.5% 3.5% 4.0% 4.0% 5.0% 7.0% 6.0% 7.0% 7.0% 15.5% 8 3.5% 4.0% 4.0% 4.0% 5.0% 7.0% 6.0% 7.0% 7.0% 16.0% 9 3.5% 4.0% 4.0% 4.0% 5.0% 7.0% 6.5% 7.0% 7.0% 16.0% % 4.0% 4.0% 4.0% 5.0% 7.0% 6.5% 7.0% 7.0% 16.5% % 4.0% 4.0% 4.0% 5.5% 7.0% 6.5% 7.0% 7.0% 16.5% % 4.0% 4.0% 4.0% 5.5% 7.5% 6.5% 7.5% 7.5% 17.0% % 4.0% 4.0% 4.0% 5.5% 7.5% 6.5% 7.5% 7.5% 17.0% % 4.0% 4.0% 4.5% 5.5% 7.5% 7.0% 7.5% 7.5% 17.0% % 4.0% 4.5% 4.5% 5.5% 7.5% 7.0% 7.5% 7.5% 17.5% % 4.0% 4.5% 4.5% 5.5% 7.5% 7.0% 7.5% 7.5% 17.5% % 4.5% 4.5% 4.5% 6.0% 8.0% 7.0% 8.0% 8.0% 18.0% % 4.5% 4.5% 4.5% 6.0% 8.0% 7.0% 8.0% 8.0% 18.0% % 4.5% 4.5% 4.5% 6.0% 8.0% 7.0% 8.0% 8.0% 18.5% % 4.5% 4.5% 4.5% 6.0% 8.0% 7.5% 8.0% 8.0% 18.5% % 4.5% 4.5% 4.5% 6.0% 8.0% 7.5% 8.0% 8.0% 29.0% % 4.5% 4.5% 4.5% 6.0% 8.5% 7.5% 8.5% 17.5% 27.5% % 4.5% 4.5% 5.0% 6.0% 8.5% 7.5% 25.0% 8.5% 28.0% % 4.5% 5.0% 5.0% 6.5% 8.5% 17.0% 7.5% 8.0% 28.5% % 5.0% 5.0% 5.0% 6.5% 16.5% 7.0% 7.0% 7.0% 28.5% % 5.0% 5.0% 5.0% 9.5% 8.5% 8.0% 8.5% 8.5% 29.0% % 5.0% 5.0% 15.5% 9.0% 9.5% 9.5% 9.5% 9.5% 29.5% % 5.0% 9.0% 8.5% 8.5% 9.0% 8.5% 9.0% 9.0% 29.5% % 12.5% 8.5% 8.5% 8.5% 9.0% 9.0% 9.0% 9.0% 30.0% % 11.5% 11.5% 11.5% 11.5% 12.5% 12.0% 12.0% 12.0% 30.0% % 11.5% 11.5% 11.5% 11.5% 12.5% 12.0% 12.0% 12.0% 30.5% % 11.5% 11.5% 11.5% 12.0% 12.5% 12.0% 12.0% 12.5% 31.0% % 12.5% 12.5% 13.0% 13.0% 13.5% 13.0% 13.5% 13.5% 31.0% % 15.0% 15.0% 15.0% 15.5% 16.0% 15.5% 16.0% 16.0% 31.5% % 24.0% 24.0% 24.5% 24.5% 26.0% 25.0% 25.5% 25.5% 32.0% Rates are set at 100% for ages over 64 years and for service over 35 years. Green shading indicates exactly 85 points. Aon Consulting Inc All Rights Reserved 35

38 Proposed Female Retirement Rates Age Service % 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 10.0% 20.0% 30.0% 50.0% 50.0% 100.0% 1 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 10.0% 20.0% 30.0% 50.0% 50.0% 100.0% 2 2.0% 2.0% 3.0% 3.5% 5.5% 7.5% 5.0% 6.5% 6.5% 10.0% 10.0% 20.0% 30.0% 50.0% 50.0% 100.0% 3 2.0% 2.0% 3.0% 3.5% 5.5% 7.5% 5.0% 6.5% 6.5% 15.0% 10.0% 20.0% 30.0% 50.0% 50.0% 100.0% 4 2.0% 2.0% 3.0% 3.5% 5.5% 7.5% 5.0% 6.5% 6.5% 15.0% 10.0% 20.0% 30.0% 50.0% 50.0% 100.0% 5 2.0% 2.0% 3.0% 3.5% 5.5% 7.5% 5.0% 6.5% 6.5% 15.0% 20.0% 20.0% 30.0% 50.0% 50.0% 100.0% 6 2.0% 2.0% 3.0% 3.5% 5.5% 7.5% 5.0% 6.5% 6.5% 15.0% 20.0% 20.0% 30.0% 50.0% 50.0% 100.0% 7 2.0% 2.0% 3.0% 3.5% 5.5% 7.5% 5.0% 6.5% 6.5% 15.0% 30.0% 20.0% 30.0% 50.0% 50.0% 100.0% 8 2.0% 2.0% 3.5% 3.5% 6.0% 7.5% 5.0% 6.5% 6.5% 15.0% 30.0% 20.0% 30.0% 50.0% 50.0% 100.0% 9 3.5% 3.0% 3.5% 3.5% 6.0% 7.5% 5.0% 6.5% 6.5% 15.0% 30.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 3.5% 3.5% 6.0% 7.5% 5.0% 6.5% 6.5% 15.0% 30.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 3.5% 3.5% 6.0% 7.5% 5.0% 6.5% 6.5% 25.0% 30.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 3.5% 3.5% 6.0% 7.5% 5.0% 6.5% 6.5% 25.0% 30.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 3.5% 3.5% 6.0% 7.5% 5.0% 6.5% 6.5% 25.0% 30.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 3.5% 3.5% 6.5% 7.5% 5.0% 6.5% 6.5% 25.0% 30.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 3.5% 3.5% 6.5% 7.5% 5.0% 6.5% 6.5% 25.0% 35.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 3.5% 3.5% 6.5% 7.5% 5.0% 6.5% 6.5% 25.0% 35.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 4.0% 3.5% 6.5% 7.5% 5.0% 6.5% 6.5% 25.0% 35.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 4.0% 3.5% 6.5% 7.5% 6.5% 6.5% 9.5% 25.0% 35.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 4.0% 3.5% 7.0% 7.5% 6.5% 6.5% 9.5% 25.0% 35.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 4.0% 3.5% 7.0% 7.5% 6.5% 6.5% 9.5% 25.0% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 4.0% 3.5% 7.0% 7.5% 6.5% 6.5% 15.0% 25.0% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 4.0% 3.5% 7.0% 7.5% 6.5% 12.5% 15.0% 27.5% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 4.0% 3.5% 7.0% 11.0% 17.5% 17.5% 12.5% 27.5% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 4.0% 5.0% 7.0% 20.0% 17.5% 12.5% 10.0% 27.5% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 4.0% 7.5% 12.5% 20.0% 12.5% 12.5% 10.0% 27.5% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 4.0% 12.5% 12.5% 11.0% 12.5% 12.5% 10.0% 27.5% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 3.0% 12.5% 12.5% 10.0% 10.5% 12.5% 12.5% 10.0% 27.5% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 12.5% 12.5% 10.0% 10.0% 13.5% 10.0% 10.0% 7.5% 27.5% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 12.5% 10.0% 10.0% 10.0% 13.5% 10.0% 10.0% 7.5% 27.5% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 10.0% 10.0% 10.0% 10.0% 14.5% 10.0% 10.0% 7.5% 27.5% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 10.0% 10.0% 10.0% 12.5% 16.0% 10.0% 10.0% 7.5% 27.5% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 10.0% 10.0% 10.0% 12.5% 14.5% 10.0% 10.0% 10.0% 27.5% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 10.0% 10.0% 10.0% 12.5% 13.5% 10.0% 15.0% 15.0% 27.5% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 10.0% 10.0% 10.0% 10.0% 11.0% 10.0% 15.0% 12.5% 27.5% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 15.0% 10.0% 19.5% 19.5% 20.5% 10.0% 20.0% 12.5% 27.5% 50.0% 20.0% 30.0% 50.0% 50.0% 100.0% % 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Rates are set at 100% for ages 70 and over and for service over 35 years. Green shading indicates the earliest age / service combination at which unreduced retirement is available. Aon Consulting Inc All Rights Reserved 36

39 Proposed Male Retirement Rates Age Service % 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% 1 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% 2 2.5% 3.0% 3.0% 3.5% 4.5% 6.5% 5.0% 6.5% 7.0% 14.5% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% 3 2.5% 3.0% 3.0% 3.5% 4.5% 6.5% 5.0% 6.5% 7.0% 15.0% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% 4 2.5% 3.0% 3.0% 3.5% 5.0% 6.5% 5.0% 6.5% 7.0% 15.0% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% 5 2.5% 3.0% 3.0% 3.5% 5.0% 6.5% 5.0% 6.5% 7.0% 15.0% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% 6 2.5% 3.0% 3.0% 4.0% 5.0% 6.5% 5.0% 6.5% 7.0% 15.5% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% 7 2.5% 3.0% 3.0% 4.0% 5.0% 7.0% 5.0% 7.0% 7.0% 15.5% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% 8 2.5% 3.0% 3.0% 4.0% 5.0% 7.0% 5.0% 7.0% 7.0% 16.0% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% 9 2.5% 3.0% 3.0% 4.0% 5.0% 7.0% 5.0% 7.0% 7.0% 16.0% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.0% 3.0% 4.0% 5.0% 7.0% 5.0% 8.0% 7.0% 16.5% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.5% 3.0% 4.0% 5.5% 7.0% 5.0% 8.0% 7.0% 16.5% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.5% 3.0% 4.0% 5.5% 7.5% 5.0% 8.0% 7.0% 17.0% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.5% 3.0% 4.0% 5.5% 7.5% 5.0% 8.0% 7.0% 17.0% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.5% 3.0% 4.5% 5.5% 7.5% 7.0% 8.0% 7.0% 17.0% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.5% 3.0% 4.5% 5.5% 7.5% 7.0% 8.0% 7.0% 17.5% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.5% 3.0% 4.5% 5.5% 7.5% 7.0% 8.0% 7.0% 17.5% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.5% 3.0% 4.5% 6.0% 7.5% 7.0% 8.0% 7.0% 18.0% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.5% 3.0% 4.5% 6.0% 7.5% 7.0% 8.0% 7.0% 18.0% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.5% 3.0% 4.5% 6.0% 7.5% 7.0% 8.0% 7.0% 18.5% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.5% 3.0% 4.5% 6.0% 7.5% 7.5% 8.0% 7.0% 18.5% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.5% 3.0% 4.5% 6.0% 7.5% 7.5% 8.0% 15.0% 20.0% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.5% 3.0% 4.5% 6.0% 12.0% 7.5% 8.0% 10.0% 27.5% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.5% 3.0% 5.0% 6.0% 12.0% 7.5% 20.0% 15.0% 28.0% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 3.5% 3.0% 5.0% 6.5% 12.0% 15.0% 20.0% 15.0% 28.5% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 5.0% 5.0% 5.0% 10.0% 20.0% 7.0% 20.0% 10.0% 28.5% 35.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 5.0% 5.0% 10.0% 10.0% 8.0% 8.0% 10.0% 10.0% 29.0% 45.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 5.0% 15.0% 10.0% 7.5% 8.0% 9.5% 10.0% 10.0% 29.5% 45.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 15.0% 15.0% 7.5% 7.5% 8.0% 8.5% 10.0% 10.0% 29.5% 45.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 15.0% 10.0% 7.5% 7.5% 8.0% 9.0% 10.0% 10.0% 30.0% 45.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 10.0% 10.0% 7.5% 7.5% 11.0% 12.0% 10.0% 10.0% 30.0% 45.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 10.0% 10.0% 7.5% 7.5% 11.0% 12.0% 10.0% 10.0% 30.5% 45.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 10.0% 10.0% 7.5% 15.0% 11.0% 12.0% 10.0% 10.0% 31.0% 45.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 10.0% 15.0% 7.5% 15.0% 13.5% 13.0% 15.0% 20.0% 31.0% 45.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 10.0% 15.0% 15.0% 15.0% 16.0% 15.5% 15.0% 20.0% 31.5% 45.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 25.0% 15.0% 20.0% 15.0% 20.0% 22.5% 20.0% 20.0% 32.0% 45.0% 25.0% 25.0% 50.0% 50.0% 100.0% % 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Rates are set at 100% for ages 70 and over and for service over 35 years. Green shading indicates the earliest age / service combination at which unreduced retirement is available. Aon Consulting Inc All Rights Reserved 37

40 Appendix C: Seniority, Merit and Promotion Rate Assumptions Age Current Rates Proposed Rates under % 7.75% % 7.25% % 6.75% % 5.75% % 5.00% % 4.25% % 3.75% % 3.25% % 3.00% % 2.50% % 2.25% % 2.00% % 1.75% % 1.50% % 1.25% % 1.25% % 1.00% % 0.75% % 0.50% % 0.50% % 0.25% % 0.25% % 0.25% % 0.25% % 0.25% % 0.25% % 0.25% % 0.35% % 0.35% % 0.35% % 0.35% % 0.35% % 0.35% % 0.35% % 0.35% 56 and older 0.00% 0.00% Aon Consulting Inc All Rights Reserved 38

41 Appendix D: Overview of the 2014 Mortality Study A study of the PSPP s mortality experience was conducted in 2014 against the backdrop of the Canadian Institute of Actuaries release of its Canadian Pensioner Mortality (CPM) Study, a first of its kind study on the mortality experience of Canadian pensioners. The study reviewed the PSPP s pensioner mortality experience over the period September 1, 2004 to September 1, 2013 with the aim to establish appropriate: base mortality rates reflecting current probabilities of death experienced by PSPP pensioners; and rates of future improvement in mortality rates. Given the currency of the CPM study, the PSPP mortality experience was analyzed in relation to the mortality rate tables published as part of the CPM study. Specifically: the base mortality rates were established by first determining the CPM table that best fit the structure of the PSPP experience and then applying a loading or scaling factor to these published rates to reflect the PSPP s actual level of experience; and the mortality improvement rates published in the CPM study (CPM Scale B) were adopted without adjustment as the volume of PSPP mortality experience was far too insufficient to draw any credible conclusions for such adjustments. The key proposal that the 2014 study put forward was to adopt the following mortality table: Male mortality rates: 100% of the CPM Private table rates; Female mortality rates: 95% of the CPM Private table rates; Future improvement: CPM Scale B. The 2014 study estimated that the going-concern financial impact at December 31, 2012 of adopting this table to be as follows: increase in going-concern liabilities: $279,292,000 (3% increase in liabilities); and increase in current service cost: 0.30% of pensionable earnings. The following charts summarize the PSPP s actual experience over the study period compared to the CPM Private table for both males and females. Aon Consulting Inc All Rights Reserved 39

Alberta Federation of Labour (AFL) Coalition on Pensions

Alberta Federation of Labour (AFL) Coalition on Pensions December 31, 2013 Projection of Financial Positions: Local Authorities Pension Plan (LAPP) and Public Service Pension Plan (PSPP) February 27, 2014