Kerrie Vanden Bosch, Executive Director

Transcription

1 Kerrie Vanden Bosch, Executive Director Michigan School Business Officials August 17, 2017

2 Who We Are Our Purpose Statement ORS is an innovative retirement organization driven to empower our customers for a successful today and a secure tomorrow. 2

3 ORS Customers Public School Employees Michigan Public School Employees Retirement System (MPSERS) 217,581 Active Members 211,007 Retirees and Beneficiaries Plan Types Closed Defined Benefit (DB) Plan Hybrid Plans Defined Contribution (DC) Plan Closed Retiree Healthcare Plan Personal Healthcare Fund 3

4 Who We Are RANKING 18th largest public pension system in the U.S. 24th largest pension system in the U.S. 48th largest pension system in the world ASSETS $74.1 Billion all systems Defined Benefit (DB), Hybrid, Defined Contribution (DC) and Retiree Healthcare MEMBERS 550,000 all systems PAID IN 16 $7.3 Billion in pension and healthcare benefits 4

5 Over 515,000 Customers With over 550,000 customers, 1 in 14 Michigan adults living in 1 in 9 Michigan household benefits benefit from our services. 5

6 Public School Retirement Plans 6

7 PA 92 of 2017 Enrolled Senate Bill 401 was signed into law as Public Act (PA) 92 of 2017 by Governor Snyder on July 13,

8 What didn t change PA 92 does not change the pension and retiree healthcare benefits of those already retired. PA 92 does not change the benefits or requirements for receiving a pension and retiree healthcare. PA 92 does not change the Pension Plus retirement plan for those who first worked between July 1, 2010 and January 31,

9 Service Credit Purchases Active employees who were first hired before July 1, 2010 will no longer be able to purchase most types of service credit after 5:00 p.m. EDT on September 29, Payment or a completed TDP agreement signed by both the employee and the employer, must be received by ORS before the closing date. 9

10 Service Credit Purchases Service credit types that will be discontinued as of 5:00 p.m., Sept. 29, 2017: Universal Buy-In Service Parental Leave Nonpublic Educational Service Out-of-System Public Educational Service Both Pre- and Post 1974 Sabbatical Leave Both Pre- and Post-1981 Parental Leave State of Michigan Service for both defined benefit and defined contribution service Comprehensive Employment and Training Act (CETA) Service credit types that will continue to be available after 5:00 p.m., Sept. 29, 2017: Active Duty Military Service Repayment of Refund* Weekly Workers Compensation* Payment for MIP Window* Act 88 * Certain types of payments can made by members to either reinstate service canceled by a refund or to make whole member contributions that should have been made, but weren t. Although these kinds of payments may involve a tax-deferred payment (TDP) agreement, they technically aren t service credit purchases. 10

11 What didn t change PA 92 does not affect a member s option to pay off a Tax- Deferred Payment Agreement (TDP) at the time of retirement or termination. PA 92 does not change the ORS policies which allow a member to increase their TDP deduction amount. 11

12 Defined Contribution Plan The Defined Contribution (DC) plan is the default option for new employees who first work on or after February 1, Participants who elect the DC plan on or after September 4, 2012, will receive a 4% mandatory employer contribution. Employers will match 100% of the first 3% of employee deferrals beginning on February 1, DC plan must offer one or more fixed and variable annuity options. 12

13 New Hybrid Plan Pension Plus 2 New employees who first work on or after February 1, 2018, must make an affirmative election to participate in the new hybrid plan. The new hybrid plan uses more conservative assumptions to improve plan stability. Chief among these assumptions is a 6% assumed rate of investment return. 13

14 Pension Plus 2 - Contributions The contributions for the normal cost of the new hybrid plan will be divided 50/50 between the employer and employee. In the event that unfunded actuarial accrued liabilities (UAAL) emerge in the new hybrid plan: UAAL will be calculated using a 10-year level dollar amortization and contributions towards the UAAL will be divided 50/50 between the employer and employee. 14

15 New Hybrid Plan Regular Retirement Age The regular retirement age of the new hybrid plan is 60. Regular retirement age will index to mortality experience. 15

16 New Hybrid Plan Plan Closure Trigger If the actuarial funded ratio of the new hybrid plan falls below 85% for two consecutive years, new hires will go into the DC plan. There is a 12 month cure period. 16

17 Employer Contributions Contribution Rate Floor PA 92 establishes floors on the employer contribution rates they cannot be less than in the previous FY. Separate for Normal Cost and UAAL Separate for Pension and Retiree Healthcare 17

18 Employer Contributions Current Operating Expenditures (COE) Effective with FY19, the growth rate of the current operating expenditures will be used to determine payroll upon which UAAL is applied. We are working out the implementation details and will inform you once they become available. The FY18 budget appropriates $200M to pay off the final 2 years of the 2010 Early Retirement Incentive early. 1.36% of payroll included in UAAL rate. Paying now saves $68M in interest payments later. Payment will be distributed in October State Aid payment and paid back to the retirement system. 18

19 Implementation Timeline September 29, 2017 Service credit purchases will no longer be accepted. October 1, 2017 Employers begin mandatory 4% contributions for DC participants. February 1, 2018 Employers match 100% contributions up to a maximum of 3%. The Pension Plus 2 retirement plan goes into effect. October 1, 2018 Current Operating Expenditures (COE) begin. Contribution Rate Floor impacts rates. 19

20 Employer Communication Public School Employers Information website 20

21 GASB 74/75 Government Accounting Standards Board (GASB) Statements No. 74 & 75. Similar to GASB 67 and 68, but for retiree health care rather than pension. 74 sets reporting guidance for the plan (State of Michigan). 75 sets guidance for the reporting units. Effective for the FY 2018 financial statements. Similar to pensions, retiree health liability now reported on balance sheet. Reporting units can expect similar service from ORS to what is provided for GASB 68. Expect reports to be published in early July

22 3% Retiree Healthcare Supreme Court Case 3% Retiree Healthcare Supreme Court Case On May 31, the Michigan Supreme Court agreed to hear arguments regarding the member contributions of 3% toward their retiree healthcare. A decision is expected to be made late summer When a final determination is made, we will post the information on the Employer Information website. 22

23 Questions 23

24 Contacts Kerrie Vanden Bosch, Executive Director DTMB Office of Retirement Services phone