MISSOURI STATE EMPLOYEES RETIREMENT SYSTEM

MISSOURI STATE EMPLOYEES RETIREMENT SYSTEM 4-YEAR EXPERIENCE STUDY JULY 1, 2003 THROUGH JUNE 30, 2007

ACTUARIAL INVESTIGATION REPORT 2003-2007 TABLE OF CONTENTS Item Overview and Economic Assumptions Summary of the Valuation Results Salary Increases Retirement Experience Withdrawal Experience Disability Experience Mortality Experience Miscellaneous and Technical Assumptions New Assumption Listing Glossary Section A B C D E F G H I J Missouri State Employees Retirement System

March 19, 2008 Board of Trustees Missouri State Employees Retirement System 907 Wildwood Drive Jefferson City, Missouri 65102 Dear Board Members: The results of the 4-year actuarial experience study of the Missouri State Employees' Retirement System are presented in this report. The investigation was conducted for the purpose of updating the actuarial assumptions used in valuing the actuarial liabilities of the Missouri State Employees' Retirement System. The investigation was based upon the statistical data furnished for annual active member and retired life actuarial valuations concerning members who died, withdrew, became disabled or retired during the last 4 years. The investigation covered the 4-year period from July 1, 2003, to June 30, 2007, and was carried out using generally accepted actuarial principles and techniques. We believe that the actuarial assumptions recommended in this experience study report represent individually and in the aggregate reasonable estimates of future experience of the Missouri State Employees' Retirement System. The actuaries submitting this statement are Members of the American Academy of Actuaries (M.A.A.A.) as indicated, and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein. Respectfully submitted, Norman L. Jones, F.S.A., E.A., M.A.A.A. Senior Consultant & Actuary Brad Lee Armstrong, A.S.A., E.A., M.A.A.A. Senior Consultant & Actuary David T. Kausch, F.S.A., E.A., M.A.A.A. Consultant & Actuary NLJ:BLA:bd C1849-1-

SECTION A OVERVIEW AND ECONOMIC ASSUMPTIONS

SUMMARY OF FINDINGS The four year period (July 1, 2003 to June 30, 2007) covered by this experience study provided sufficient data to form a basis for recommending changes in many of the assumptions used in actuarial valuations of the Missouri State Employees Retirement System. The recommended actuarial assumptions resulting from this experience study are summarized below: Alternate #1 (recommendation): No change in the spread for funding purposes at 4.5% with the wage inflation assumption at 4.0%, resulting in maintaining an overall investment return assumption of 8.5%. Decrease the price inflation assumption to 3.2%. For males, - increase the rates of withdrawal, select and ultimate. - no change to the rates of disability. - increase the rates of retirement. - decrease the rates of mortality. For females, - increase the rates of withdrawal, select and ultimate. - increase the rates of disability. - increase the rates of retirement. - increase the rates of mortality. For other assumptions, - increase the percent of active members assumed to retire under MSEP 2000. - change the liability adjustments for form of payment election and pop-up benefits. - increase the liability adjustment on pre-retirement survivor benefits for spouse of terminated vested member. Alternate #2: Assume future annual mortality improvements. All other assumptions the same as Alternate #1. The effects of the recommendations listed above, on the June 30, 2007 actuarial valuation of the Retirement System, are shown in the following table: Computed Employer Contribution Rate Present Assumptions 12.53 % Alternate #1 (recommendation) 12.69 % Alternate #2 13.06 % Additional information about the effects of proposed changes is presented in Section B. Missouri State Employees Retirement System A-1

INTRODUCTION Each year as of June 30, the actuarial liabilities of the System are valued. In order to perform the valuation, assumptions must be made regarding the future experience of the system with regard to the following risk areas: Rates of withdrawal of active members. Rates of disability among active members. Patterns of salary increases to active members. Rates of retirement among active members. Rates of mortality among active members, retirants, and beneficiaries. Long-term rates of investment return to be generated by the assets of the System. Assumptions should be carefully chosen and continually monitored. An unrealistic set of assumptions can lead to: Understated costs resulting in either an inability to pay benefits when due, or gradual increases in required contributions as time progresses; Overstated costs resulting in an unnecessarily large burden on the current generation of employers and taxpayers. A single set of assumptions will not be suitable indefinitely. Things change, and our understanding of things (whether or not they are changing) also changes. The package of assumptions is then adjusted to reflect basic experience trends -- but not random year to year fluctuations. Actuarial assumptions were last revised following the June 30, 2003 regular actuarial valuation. No single 4-year experience period should be given full credibility in the setting of actuarial valuation assumptions. When we see significant differences between what is expected from our assumptions and actual experience, our strategy in recommending a change in assumptions is usually to select rates that would produce results somewhere between the actual and expected experience. In this way, with each experience study the actuarial assumptions become better and better representations of actual experience. Consequently, temporary conditions that might influence a particular experience study period will not unduly influence the choice of long-term assumptions. We are recommending certain changes in assumptions. The various assumption changes and their impact on the required contribution are described on the following pages. Missouri State Employees Retirement System A-2

SUMMARY OF FINDINGS Decrement Assumptions Pay Increase Rates. The merit and longevity portion of pay increases were lower than assumed at most ages. Rates were adjusted slightly to bring them closer to actual experience. This change decreases the computed employer contribution rate. Details are reported in Section C. Normal Retirement Experience. Overall, there were more retirements than expected. Rates were adjusted to bring them closer to actual experience. Separate rates were developed for Grandfathered Groups and MSEP 2000 retirements. This change increases the computed employer contribution rate. Details are reported in Section D. Early Retirement Experience. Overall, there were fewer early retirements than expected. Rates were adjusted to bring them closer to actual experience based. This change decreases the computed employer contribution rate. Details are reported in Section D. Rates of Withdrawal. Crude ultimate turnover rates were more than assumed rates for males and females. The observed rates were adjusted to bring them closer to actual experience. Withdrawal rates for individuals with less than 5 years of service were more than assumed rates. These changes decrease the computed employer contribution rate. Details are reported in Section E. Disability Rates. Crude disability rates were close to previously assumed rates for males. No change is recommended. Crude disability rates were slightly higher than previously assumed rates for females. Rates were adjusted to bring them closer to actual experience. This change decreases the computed employer contribution rate. Details are reported in Section F. Death-in-Service Mortality Rates. Deaths among active members in the period studied was lower than the assumed rates for both males and females. Rates were adjusted to bring them closer to actual experience. These changes decrease the employer contribution rate. Details are reported in Section G. Retired Life Mortality. Retired life mortality was higher than assumed for males and females. Proposed assumptions include a margin for future increases in life expectancy of similar magnitude for males and females. These changes decrease the employer contribution rate. Details are reported in Section G. Post-disability mortality was changed to be the same table as healthy mortality set forward ten years. Other liability adjustments for pop-up benefits and survivor benefits for vested deferred members had the effect of increasing contribution rates. Missouri State Employees Retirement System A-3

SUMMARY OF DECREMENT EXPERIENCE 2003-2007 Expected Decrement Risk Area Actual Old New Change Withdrawal - Total Male 7,646 6,168 6,881 713 Female 12,355 10,018 11,160 1,142 Withdrawal - More Than 5 Years of Service Male 2,755 1,949 2,328 379 Female 4,506 3,825 4,144 319 Disability Male 266 282 282 0 Female 472 421 440 19 Normal Retirement Grandfathered Groups 51 31 45 14 MSEP 2000 5,232 4,019 4,966 947 Early Retirement 586 712 607 (105) Mortality - Active Lives 215 262 236 (26) Male 141 195 162 (33) Female Mortality - Retired Lives (Normal Retirement Only) Male 1,326 1,269 1,215 (54) Female 1,984 1,521 1,751 230 Missouri State Employees Retirement System A-4

ECONOMIC ASSUMPTIONS Economic assumptions include long-term rates of investment return, wage inflation (the across-theboard portion of salary increases) and price inflation. Unlike demographic activities, economic activities do not lend themselves to analysis solely on the basis of internal historical patterns because both salary increases and investment return are more affected by external forces; namely inflation, general productivity changes and changes in financial markets. Estimates of economic activities are generally selected on the basis of the expectations in an inflation-free environment and then both are increased by some provision for long-term inflation. If inflation and/or productivity increases are higher than expected, actual rates of salary increase and investment return are likely to exceed the assumed rates. Salaries increasing faster than expected produce unexpected liabilities. Investment return exceeding the assumed rates (whether due to manager performance, change in the mix of assets, or general inflation) results in unanticipated assets. To the extent that inflation, productivity, and other factors have about the same effect on both sides of the balance sheet, these additional assets and liabilities can offset one another over the longterm. Current economic assumptions for the System are as follows: Investment Return Results Investment Return 8.50% Wage Inflation 4.00 Spread 4.50 Price Inflation 3.50 The investment return on the assets of the System over the July 1, 2003 June 30, 2007 period was as follows: Year Ending 6/30 Rate of Return Rate of Actuarial Value Market Value Price Inflation Increases in Average Salary 2004 4.5 % 17.2 % 3.3 % 4.2 % 2005 7.9 12.6 2.5 5.2 2006 9.1 11.5 4.3 2.1 2007 11.2 18.6 2.7 5.7 Arithmetic Average 8.2 15.0 3.2 4.3 The assets of the System are valued using a market-related method for actuarial valuation purposes. The 8.2% average return (based on actuarial value) is below the 8.5% assumed return. However, there are remaining unrecognized market gains that will likely produce actuarial value returns in excess of 8.5% in the near term. Missouri State Employees Retirement System A-5

ECONOMIC ASSUMPTIONS INVESTMENT RETURN The Present portfolio is the MOSERS policy portfolio and the With Alpha portfolio is the MOSERS policy portfolio together with alpha enhancing strategies currently used by MOSERS. The underlying assumptions for these distributions are based on information provided by MOSERS staff and Summit Strategies. The charts were developed using Investment Plus. The assumptions underlying the charts are included at the end of the report. Missouri State Employees Retirement System A-6

ECONOMIC ASSUMPTIONS INVESTMENT RETURN The Present portfolio is the MOSERS policy portfolio and the With Alpha portfolio is the MOSERS policy portfolio with alpha enhancing strategies. The best estimate range is between the 25 th and 75 th percentile. In the case of the MOSERS investment policy with additional alpha, for a 30-year investment horizon any investment return assumption between 7.60% and 10.05% meets the actuarial standards of practice. The median return of 8.82% circled above supports continued use of the current 8.50% assumption. Missouri State Employees Retirement System A-7

ECONOMIC ASSUMPTIONS INFLATION Wage Inflation. The long-term rate of increase in National Average Earnings over the last 57 years is higher than the current System assumption (see schedule on page A-6). It is expected that, in the long run, salary increases in all parts of the country will be close to the national averages. However, few economists are forecasting a repeat of the high inflation rates experienced in the 1970's. Average salaries in the System increased 4.3% per year, on average, from 2003 to 2007 - a slightly higher pace than the assumed 4.0% a year. We are not recommending a change in this assumption. Price Inflation. With regard to inflation, the experience given for 30 and 40 years is influenced by the large annual increases from 1973 to 1982 (inflation averaged almost 10% annually during this period). While inflation defies accurate prediction, it would appear that the recent experience coupled with long term trends would suggest that a reduction in the 3.5% assumption is not unreasonable. In the 2007 OASDI report, the Social Security Administration projects inflation at 2.8% in their intermediate assumptions. In recognition of lower long term forecasts, moderated by somewhat higher recent experience, it is recommended that the price inflation assumption be reduced from 3.5% to 3.2%. In summary, our recommended economic assumptions for the System are as follows: Investment Return 8.50% Wage Inflation 4.00 Spread 4.50 Price Inflation 3.20 Missouri State Employees Retirement System A-8

HISTORICAL PATTERNS OF INVESTMENT RETURN, PAY INCREASES & INFLATION Gross Market Returns National Calendar Bonds (Long) Cash Price Average Sample Balanced Fund* Year U.S. Corp. Equiv. Stocks Inflation Earnings Total Spread: Period Treasury (S&P AA) (T Bills) (S&P 500) (CPI) (NAE) Return (I) I - NAE - e 1950-1959 (0.1)% 1.0 % 1.9 % 19.4 % 2.2 % 4.5 % 14.1 % 9.1 % 1960-1969 1.4 % 1.7 % 3.9 % 7.8 % 2.5 % 4.3 % 6.2 % 1.4 % 1970-1979 5.5 % 6.2 % 6.3 % 5.9 % 7.4 % 6.9 % 6.2 % (1.2)% 1980-1989 12.6 % 13.0 % 8.9 % 17.5 % 5.1 % 5.8 % 16.3 % 10.0 % 1990-1999 8.8 % 8.4 % 4.9 % 18.2 % 2.9 % 4.2 % 15.4 % 10.7 % 2000 21.5 % 12.9 % 5.9 % (9.1)% 3.4 % 5.5 % (1.7)% (7.7)% 2001 3.7 % 10.7 % 3.8 % (11.9)% 1.6 % 2.4 % (5.8)% (8.7)% 2002 17.8 % 16.3 % 1.7 % (22.1)% 2.4 % 1.0 % (10.4)% (11.9)% 2003 1.5 % 5.3 % 1.0 % 28.7 % 1.9 % 2.4 % 21.3 % 18.4 % 2004 8.5 % 8.7 % 1.2 % 10.9 % 3.3 % 4.7 % 10.2 % 5.0 % 2005 7.8 % 5.9 % 3.0 % 4.9 % 3.4 % 3.7 % 5.4 % 1.2 % 2006 1.2 % 3.2 % 4.8 % 15.8 % 2.5 % 2.8 % 11.8 % 8.5 % Last 57 Years 5.9 % 6.3 % 4.9 % 12.0 % 3.8 % 4.9 % 10.6 % 5.2 %# * Sample Balanced Fund # Historical Spread # Observed spread is very sensitive to the observation period, even over longer Equities 70 % periods, as illustrated below: Bonds - Government 10 % Observation Period Spread - Corporate 20 % 57 years 5.2 % Cash Equivalents 0 % 50 years 3.8 % 100 % 40 years 4.1 % Fund Expenses (e) 0.50 % 30 years 5.8 % Missouri State Employees Retirement System A-9

SECTION B SUMMARY OF THE VALUATION RESULTS

2003-2007 DEMOGRAPHIC EXPERIENCE STUDY ILLUSTRATIVE EFFECT ON THE ACTUARIAL VALUATION FOR FISCAL YEAR BEGINNING JULY 1, 2008 Demographic Assumptions Present Alternate #1 Alternate #2 Interest Rate Assumption 8.50% 8.50% 8.50% Wage Growth Assumption 4.00% 4.00% 4.00% Inflation 3.50% 3.20% 3.20% Contributions For Employer Normal Cost 8.88% 8.62% 8.94% Unfunded Actuarial Accrued Liability 3.65% 4.07% 4.12% Total Employer Contribution 12.53% 12.69% 13.06% Funded Percentage Based on Funding Value of Assets 86.8% 85.5% 85.4% Missouri State Employees Retirement System B-1

SECTION C SALARY INCREASES

MERIT & SENIORITY PAY INCREASES Age Group Beginning Merit/Seniority % Increase Expected of Year Number Actual Old New Under 25 5,321 3.35 % 2.72 % 3.13 % 25-29 15,457 2.36 % 2.38 % 2.57 % 30-34 20,406 1.30 % 2.06 % 1.90 % 35-39 23,667 0.98 % 1.69 % 1.42 % 40-44 28,699 0.76 % 1.29 % 1.09 % 45-49 33,079 0.48 % 0.99 % 0.81 % 50-54 32,789 0.34 % 0.70 % 0.61 % 55-59 24,145 0.25 % 0.70 % 0.50 % 60-64 10,251 0.32 % 0.00 % 0.41 % 65 & Over 3,129 0.00 % 0.00 % 0.26 % Total 196,943 Missouri State Employees Retirement System C-1

SECTION D RETIREMENT EXPERIENCE

AGE & SERVICE RETIREMENT EXPERIENCE MSEP 2000 (YEAR 1 ELIGIBILITY) Expected Crude Sample Rates Retirements* Age Retirements Exposure Rates Old New Old New 48 - - N\A 0.20 0.27 - - 49 36 136 0.2647 0.20 0.27 27.2 36.7 50 109 314 0.3471 0.20 0.27 62.8 84.8 51 102 323 0.3158 0.20 0.27 64.6 87.2 52 151 530 0.2849 0.20 0.27 106.0 143.1 53 125 436 0.2867 0.20 0.27 87.2 117.7 54 95 375 0.2533 0.20 0.27 75.0 101.3 55 83 309 0.2686 0.25 0.27 77.3 83.4 56 80 289 0.2768 0.20 0.27 57.8 78.0 57 66 267 0.2472 0.20 0.22 53.4 58.7 58 59 258 0.2287 0.20 0.22 51.6 56.8 59 63 264 0.2386 0.20 0.22 52.8 58.1 60 103 643 0.1602 0.25 0.25 160.8 160.8 61 28 167 0.1677 0.20 0.20 33.4 33.4 62 188 927 0.2028 0.30 0.20 278.1 185.4 63 11 110 0.1000 0.20 0.15 22.0 16.5 64 15 78 0.1923 0.20 0.20 15.6 15.6 65 77 354 0.2175 0.30 0.25 106.2 88.5 66 8 37 0.2162 0.20 0.20 7.4 7.4 67 4 21 0.1905 0.20 0.20 4.2 4.2 68 2 11 0.1818 0.20 0.20 2.2 2.2 69 5 13 0.3846 0.20 0.20 2.6 2.6 70 1 8 0.1250 0.20 0.20 1.6 1.6 71 1 11 0.0909 0.20 0.20 2.2 2.2 72-2 0.0000 0.20 0.20 0.4 0.4 73 1 7 0.1429 0.20 0.20 1.4 1.4 74-8 0.0000 0.20 0.20 1.6 1.6 75-4 0.0000 1.00 0.50-2.0 76-4 0.0000 1.00 0.50-2.0 77-2 0.0000 1.00 0.75-1.5 Totals 1,413 5,908 0.2392 1,355.3 1,435.1 78 & Over 1 - N\A 1.00 1.00 10.0 - Total 1,414 5,908 0.2393 1,365.3 1,435.1 * Expected retirements New is calculated as the sum of rates applied to exposure at individual ages. Expected retirements Old is the sum of actual probabilities applied in the valuation. Missouri State Employees Retirement System D-1

AGE & SERVICE RETIREMENT EXPERIENCE MSEP 2000 (YEAR 1 ELIGIBILITY) 0.45 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 48 50 52 54 56 58 60 62 64 66 68 Age Actual Experience Present Assumptions Proposed Assumptions Missouri State Employees Retirement System D-2

AGE & SERVICE RETIREMENT EXPERIENCE MSEP 2000 (YEAR 2 ELIGIBILITY) Expected Crude Sample Rates Retirements* Age Retirements Exposure Rates Old New Old New 49 - - N\A 0.10 0.14 - - 50 27 108 0.2500 0.10 0.14 10.8 15.1 51 33 202 0.1634 0.10 0.14 20.2 28.3 52 36 225 0.1600 0.10 0.14 22.5 31.5 53 57 376 0.1516 0.10 0.14 37.6 52.6 54 38 306 0.1242 0.10 0.14 30.6 42.8 55 36 279 0.1290 0.10 0.14 27.9 39.1 56 35 231 0.1515 0.10 0.14 23.1 32.3 57 33 232 0.1422 0.10 0.14 23.2 32.5 58 31 201 0.1542 0.10 0.14 20.1 28.1 59 33 189 0.1746 0.10 0.14 18.9 26.5 60 26 170 0.1529 0.10 0.14 17.0 23.8 61 50 473 0.1057 0.10 0.14 47.3 66.2 62 33 128 0.2578 0.15 0.22 19.2 28.2 63 137 668 0.2051 0.12 0.20 80.2 133.6 64 12 76 0.1579 0.12 0.20 9.1 15.2 65 15 53 0.2830 0.15 0.20 8.0 10.6 66 67 260 0.2577 0.12 0.20 31.2 52.0 67 9 27 0.3333 0.12 0.20 3.2 5.4 68 1 11 0.0909 0.12 0.20 1.3 2.2 69 2 10 0.2000 0.12 0.20 1.2 2.0 70 1 7 0.1429 0.12 0.20 0.8 1.4 71 1 7 0.1429 0.12 0.20 0.8 1.4 72 2 7 0.2857 0.12 0.20 0.8 1.4 73-2 0.0000 0.12 0.20 0.2 0.4 74-9 0.0000 0.12 0.20 1.1 1.8 75-7 0.0000 1.00 0.50 7.0 3.5 76-3 0.0000 1.00 0.50 3.0 1.5 77-1 0.0000 1.00 0.75 1.0 0.8 Totals 715 4,268 0.1675 467.4 680.2 78 & Over 1 2 0.5000 1.00 1.00 2.0 2.0 Total 716 4,270 0.1677 469.4 682.2 * Expected retirements New is calculated as the sum of rates applied to exposure at individual ages. Expected retirements Old is the sum of actual probabilities applied in the valuation. Missouri State Employees Retirement System D-3

AGE & SERVICE RETIREMENT EXPERIENCE MSEP 2000 (YEAR 2 ELIGIBILITY) 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 49 51 53 55 57 59 61 63 65 67 69 Age Actual Experience Present Assumptions Proposed Assumptions Missouri State Employees Retirement System D-4

AGE & SERVICE RETIREMENT EXPERIENCE MSEP 2000 (YEAR 3 ELIGIBILITY) Expected Crude Sample Rates Retirements* Age Retirements Exposure Rates Old New Old New 50 & Under 59 - N\A 0.08 0.18 - - 51 34 76 0.4474 0.08 0.18 6.1 13.7 52 76 225 0.3378 0.08 0.18 18.0 40.5 53 84 362 0.2320 0.08 0.18 29.0 65.2 54 144 574 0.2509 0.08 0.18 45.9 103.3 55 188 679 0.2769 0.12 0.25 81.5 169.8 56 187 687 0.2722 0.12 0.25 82.4 171.8 57 182 729 0.2497 0.12 0.20 87.5 145.8 58 161 716 0.2249 0.12 0.20 85.9 143.2 59 164 703 0.2333 0.12 0.20 84.4 140.6 60 191 659 0.2898 0.12 0.25 79.1 164.8 61 149 578 0.2578 0.12 0.20 69.4 115.6 62 267 829 0.3221 0.30 0.35 248.7 290.2 63 221 646 0.3421 0.20 0.30 129.2 193.8 64 191 908 0.2104 0.20 0.20 181.6 181.6 65 180 718 0.2507 0.30 0.30 215.4 215.4 66 156 523 0.2983 0.20 0.25 104.6 130.8 67 115 513 0.2242 0.20 0.20 102.6 102.6 68 93 393 0.2366 0.20 0.20 78.6 78.6 69 49 314 0.1561 0.20 0.20 62.8 62.8 70 58 236 0.2458 0.20 0.20 47.2 47.2 71 42 162 0.2593 0.20 0.20 32.4 32.4 72 27 109 0.2477 0.20 0.20 21.8 21.8 73 19 76 0.2500 0.20 0.20 15.2 15.2 74 12 79 0.1519 0.20 0.20 15.8 15.8 75 18 74 0.2432 1.00 0.50 74.0 37.0 76 11 52 0.2115 1.00 0.50 52.0 26.0 77 3 37 0.0811 1.00 0.75 37.0 27.8 Totals 3,081 11,657 0.2643 2,088.0 2,753.0 78 & Over 21 96 0.2188 1.00 1.00 96.0 96.0 Total 3,102 11,753 0.2639 2,184.0 2,849.0 * Expected retirements New is calculated as the sum of rates applied to exposure at individual ages. Expected retirements Old is the sum of actual probabilities applied in the valuation. Missouri State Employees Retirement System D-5

AGE & SERVICE RETIREMENT EXPERIENCE MSEP 2000 (YEAR 3 ELIGIBILITY) 0.50 0.45 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 50 & Under 52 54 56 58 60 62 64 Age 66 68 70 72 74 Actual Experience Present Assumptions Proposed Assumptions Missouri State Employees Retirement System D-6

AGE & SERVICE RETIREMENT EXPERIENCE GRANDFATHERED GROUPS (YEAR 1 ELIGIBILITY) Expected Crude Sample Rates Retirements* Age Retirements Exposure Rates Old New Old New 48 - - N\A 0.20 0.20 - - 49 - - N\A 0.20 0.20 - - 50-1 0.0000 0.20 0.20 0.2 0.2 51-1 0.0000 0.20 0.20 0.2 0.2 52-4 0.0000 0.20 0.20 0.8 0.8 53 2 2 1.0000 0.20 0.20 0.4 0.4 54 - - N\A 0.20 0.20 - - 55 3 14 0.2143 0.25 0.25 3.5 3.5 56 - - N\A 0.20 0.20 - - 57 - - N\A 0.20 0.20 - - 58 - - N\A 0.20 0.20 - - 59 - - N\A 0.20 0.20 - - 60 - - N\A 0.25 0.25 - - 61 - - N\A 0.20 0.20 - - 62 - - N\A 0.30 0.30 - - 63-1 0.0000 0.20 0.20 0.2 0.2 64 - - N\A 0.20 0.20 - - Totals 5 23 0.2174 5.3 5.3 65 & Over - - N\A 1.00 1.00 - - Total 5 23 0.2174 5.3 5.3 * Expected retirements New is calculated as the sum of rates applied to exposure at individual ages. Expected retirements Old is the sum of actual probabilities applied in the valuation. Missouri State Employees Retirement System D-7

AGE & SERVICE RETIREMENT EXPERIENCE GRANDFATHERED GROUPS (YEAR 1 ELIGIBILITY) 1.20 1.00 0.80 0.60 0.40 0.20 0.00 48 50 52 54 56 58 60 62 64 Age Actual Experience Present Assumptions Proposed Assumptions Missouri State Employees Retirement System D-8

AGE & SERVICE RETIREMENT EXPERIENCE GRANDFATHERED GROUPS (YEAR 2 ELIGIBILITY) Expected Crude Sample Rates Retirements* Age Retirements Exposure Rates Old New Old New 49 - - N\A 0.10 0.10 - - 50 - - N\A 0.10 0.10 - - 51-1 0.0000 0.10 0.10 0.1 0.1 52-1 0.0000 0.10 0.10 0.1 0.1 53-1 0.0000 0.10 0.10 0.1 0.1 54 - - N\A 0.10 0.10 - - 55 - - N\A 0.10 0.10 - - 56 2 7 0.2857 0.10 0.10 0.7 0.7 57-3 0.0000 0.10 0.10 0.3 0.3 58 1 4 0.2500 0.10 0.10 0.4 0.4 59 - - N\A 0.10 0.10 - - 60 - - N\A 0.10 0.10 - - 61 - - N\A 0.10 0.10 - - 62-1 0.0000 0.15 0.15 0.2 0.2 63-1 0.0000 0.12 0.12 0.1 0.1 64 - - N\A 0.12 0.12 - - Totals 3 19 0.1579 2.0 2.0 65 & Over 1 6 0.1667 1.00 1.00 2.5 2.5 Total 4 25 0.1600 4.5 4.5 * Expected retirements New is calculated as the sum of rates applied to exposure at individual ages. Expected retirements Old is the sum of actual probabilities applied in the valuation. Missouri State Employees Retirement System D-9

AGE & SERVICE RETIREMENT EXPERIENCE GRANDFATHERED GROUPS (YEAR 2 ELIGIBILITY) 0.30 0.25 0.20 0.15 0.10 0.05 0.00 49 51 53 55 57 59 61 63 Age Actual Experience Present Assumptions Proposed Assumptions Missouri State Employees Retirement System D-10

AGE & SERVICE RETIREMENT EXPERIENCE GRANDFATHERED GROUPS (YEAR 3 ELIGIBILITY) Expected Crude Sample Rates Retirements* Age Retirements Exposure Rates Old New Old New 50 & Under - - N\A 0.08 0.08 - - 51 - - N\A 0.08 0.08 - - 52-1 0.0000 0.08 0.08 0.1 0.1 53 - - N\A 0.08 0.08 - - 54-2 0.0000 0.08 0.08 0.2 0.2 55-1 0.0000 0.12 0.12 0.1 0.1 56 1 1 1.0000 0.12 0.12 0.1 0.1 57 3 10 0.3000 0.12 0.12 1.2 1.2 58 8 11 0.7273 0.12 0.30 1.3 3.3 59 3 10 0.3000 0.12 0.30 1.2 3.0 60 4 7 0.5714 0.12 0.30 0.8 2.1 61 1 6 0.1667 0.12 0.30 0.7 1.8 62 3 5 0.6000 0.30 0.50 1.5 2.5 63 2 3 0.6667 0.20 0.40 0.6 1.2 64 2 5 0.4000 0.20 0.40 1.0 2.0 65 3 3 1.0000 0.30 0.50 0.9 1.5 66 1 5 0.2000 0.20 0.40 1.0 2.0 67 3 5 0.6000 0.20 0.40 1.0 2.0 68 2 2 1.0000 0.20 0.40 0.4 0.8 69 1 3 0.3333 0.20 0.40 0.6 1.2 70 2 2 1.0000 0.20 0.40 0.4 0.8 71-1 0.0000 0.20 0.40 0.2 0.4 72-2 0.0000 0.20 0.40 0.4 0.8 73 1 2 0.5000 0.20 0.40 0.4 0.8 74-1 0.0000 0.20 0.40 0.2 0.4 75-1 0.0000 1.00 1.00 1.0 1.0 76 1 1 1.0000 1.00 1.00 1.0 1.0 77-1 0.0000 1.00 1.00 1.0 1.0 Totals 41 91 0.4505 17.4 31.3 78 & Over 1 4 0.2500 1.00 1.00 4.0 4.0 Total 42 95 0.4421 21.4 35.3 * Expected retirements New is calculated as the sum of rates applied to exposure at individual ages. Expected retirements Old is the sum of actual probabilities applied in the valuation. Missouri State Employees Retirement System D-11

AGE & SERVICE RETIREMENT EXPERIENCE GRANDFATHERED GROUPS (YEAR 3 ELIGIBILITY) 1.20 1.00 0.80 0.60 0.40 0.20 0.00 50 & Under 52 54 56 58 60 62 64 Age 66 68 70 72 74 Actual Experience Present Assumptions Proposed Assumptions Missouri State Employees Retirement System D-12

EARLY RETIREMENT EXPERIENCE Expected Crude Sample Rates Retirements* Age Retirements Exposure Rates Old New Old New 55 & Under 18 1,290 0.0140 0.0500 0.0300 65 39 56 18 1,236 0.0146 0.0500 0.0300 62 37 57 88 3,232 0.0272 0.0500 0.0300 162 97 58 86 2,784 0.0309 0.0500 0.0400 139 111 59 85 2,303 0.0369 0.0500 0.0400 115 92 60 82 1,526 0.0537 0.0500 0.0500 76 76 61 109 1,234 0.0883 0.0500 0.0700 62 86 62 44 255 0.1725 0.0500 0.1000 13 26 63 28 214 0.1308 0.0500 0.1000 11 21 64 26 168 0.1548 0.0500 0.1000 8 17 Totals 585 14,245 0.0411 0.0500 0.0425 712 605 65 & Over 1 3 0.3333 0.0500 0.5000 0 2 Total 586 14,248 0.0411 0.0500 0.0426 712 607 * Expected retirements New is calculated as the sum of rates applied to exposure at individual ages. Expected retirements Old is the sum of actual probabilities applied in the valuation. 0.20 0.18 0.16 0.14 0.12 0.10 0.08 0.06 0.04 0.02 0.00 55 & Under 56 57 58 59 60 Age 61 62 63 64 Actual Experience Present Assumptions Proposed Assumptions Missouri State Employees Retirement System D-13

SECTION E WITHDRAWAL EXPERIENCE

WITHDRAWAL EXPERIENCE (MALE) There were 4,891 male withdrawals and 28,314 life years of exposure included in the service based withdrawal investigation and 2,755 withdrawals and 50,163 life years of exposure included in the age based withdrawal investigation. A withdrawal is a separation from active member status for a reason other than disability, death, or retirement and may be either vested or non-vested. Less Than 5 Years of Service at Assumed Termination (Middle of Year) Expected Service Crude Sample Rates Withdrawals Index Withdrawals Exposure Rates Old New Old New 1 833 3,499 0.2381 0.2383 0.2380 834 833 2 1,542 7,209 0.2139 0.1649 0.1890 1,189 1,363 3 1,091 6,336 0.1722 0.1341 0.1530 849 969 4 795 5,843 0.1361 0.1192 0.1280 696 748 5 630 5,427 0.1161 0.1200 0.1180 651 640 Totals 4,891 28,314 0.1727 0.1490 0.1608 4,219 4,553 Ref 300 521 5 or More Years of Service at Assumed Termination (Middle of Year) Expected Crude Sample Rates* Withdrawals** Age Withdrawals Exposure Rates Old New Old New 20 & Under 4 18 0.2222 0.1200 0.1180 2 2 25-29 173 1,150 0.1504 0.1000 0.1180 112 128 30-34 435 4,313 0.1009 0.0800 0.0900 333 380 35-39 518 6,458 0.0802 0.0518 0.0660 344 428 40-44 482 8,352 0.0577 0.0414 0.0500 344 415 45-49 452 10,305 0.0439 0.0311 0.0370 325 388 50-54 385 10,294 0.0374 0.0260 0.0320 267 331 55-59 221 7,004 0.0316 0.0240 0.0280 168 198 60 and over 85 2,269 0.0375 0.0240 0.0250 54 58 Totals 2,755 50,163 0.0549 0.0389 0.0464 1,949 2,328 Ref 366 1034 * Sample rates are taken from midpoint of age group. ** Expected withdrawals New is calculated as the sum of rates applied to exposure at individual ages. Expected withdrawals Old is the sum of actual probabilities applied in the valuation. Withdrawal experience was measured by years of service for those terminating with less than 5 years of service and by 5-year age groups for those terminating with 5 or more years of service. Missouri State Employees Retirement System E-1

WITHDRAWAL EXPERIENCE (MALE) Rates of Withdrawal with Up To 5 Years of Service 0.30 0.25 0.20 0.15 0.10 0.05 0.00 0 1 2 3 4 Service Actual Experience Present Assumptions Proposed Assumptions Rates of Withdrawal with 5 or More Years of Service 0.16 0.14 0.12 0.10 0.08 0.06 0.04 0.02 0.00 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60 and over Age Actual Experience Present Assumptions Proposed Assumptions Missouri State Employees Retirement System E-2

WITHDRAWAL EXPERIENCE (FEMALE) There were 7,849 female withdrawals and 42,479 life years of exposure included in the service based withdrawal investigation and 4,506 withdrawals and 80,873 life years of exposure included in the age based withdrawal investigation. A withdrawal is a separation from active member status for a reason other than disability, death, or retirement and may be either vested or non-vested. Less Than 5 Years of Service at Assumed Termination (Middle of Year) Expected Service Crude Sample Rates Withdrawals Index Withdrawals Exposure Rates Old New Old New 1 1,416 4,867 0.2909 0.2467 0.2690 1,201 1,309 2 2,584 10,833 0.2385 0.1720 0.2050 1,863 2,221 3 1,629 9,423 0.1729 0.1353 0.1540 1,275 1,451 4 1,281 8,908 0.1438 0.1067 0.1250 951 1,114 5 939 8,448 0.1112 0.1069 0.1090 903 921 Totals 7,849 42,479 0.1848 0.1458 0.1652 6,193 7,016 Ref 301 522 5 or More Years of Service at Assumed Termination (Middle of Year) Expected Crude Sample Rates* Withdrawals** Age Withdrawals Exposure Rates Old New Old New 20 & Under 14 89 0.1573 0.1100 0.1090 10 10 25-29 325 2,589 0.1255 0.1056 0.1090 269 274 30-34 850 8,189 0.1038 0.0870 0.0950 700 749 35-39 848 11,354 0.0747 0.0565 0.0660 652 759 40-44 752 14,081 0.0534 0.0460 0.0500 648 708 45-49 725 17,233 0.0421 0.0392 0.0410 684 715 50-54 589 14,960 0.0394 0.0343 0.0370 503 549 55-59 313 10,099 0.0310 0.0290 0.0300 293 312 60 and over 90 2,279 0.0395 0.0290 0.0300 66 68 Totals 4,506 80,873 0.0557 0.0473 0.0512 3,825 4,144 Ref 367 1035 * Sample rates are taken from midpoint of age group. ** Expected withdrawals New is calculated as the sum of rates applied to exposure at individual ages. Expected withdrawals Old is the sum of actual probabilities applied in the valuation. Withdrawal experience was measured by years of service for those terminating with less than 5 years of service and by 5-year age groups for those terminating with 5 or more years of service. Missouri State Employees Retirement System E-3

WITHDRAWAL EXPERIENCE (FEMALE) Rates of Withdrawal with Up To 5 Years of Service 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 0 1 2 3 4 Service Actual Experience Present Assumptions Proposed Assumptions Rates of Withdrawal with 5 or More Years of Service 0.14 0.12 0.10 0.08 0.06 0.04 0.02 0.00 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60 and over Age Actual Experience Present Assumptions Proposed Assumptions Missouri State Employees Retirement System E-4

SECTION F DISABILITY EXPERIENCE

MALE DISABILITY EXPERIENCE There were 266 disability benefit claims reported for the 4-year period and 50,163 years of exposure (exposure includes active members with 5 or more years of service). Expected Crude Sample Rates* Disabilities** Age Disabilities Exposure Rates Old New Old New 25 and Under 2 1,168 0.0017 0.0016 0.0016 2 2 30-34 10 4,313 0.0023 0.0019 0.0019 8 8 35-39 13 6,458 0.0020 0.0021 0.0021 15 15 40-44 26 8,352 0.0031 0.0030 0.0030 25 25 45-49 39 10,305 0.0038 0.0040 0.0040 41 41 50-54 70 10,294 0.0068 0.0066 0.0066 69 69 55-59 77 7,004 0.0110 0.0127 0.0127 87 87 60 and over 29 2,269 0.0128 0.0158 0.0158 35 35 Totals 266 50,163 0.0053 0.0056 0.0056 282 282 Ref 212 212 * Sample rates are taken from midpoint of age group. ** Expected disabilities New is calculated as the sum of rates applied to exposure at individual ages. Expected disabilities Old is the sum of actual probabilities applied in the valuation. 0.018 0.016 0.014 0.012 0.010 0.008 0.006 0.004 0.002 0.000 25 and Under 30-34 35-39 40-44 45-49 50-54 55-59 60 and over Age Actual Experience Present Assumptions Proposed Assumptions Disability rates were computed by 5-year age groups. The proposed weighting of duty and ordinary disability continues to be 0%/100%. Missouri State Employees Retirement System F-1

FEMALE DISABILITY EXPERIENCE There were 472 disability benefit claims reported for the 4-year period and 80,873 years of exposure (exposure includes active members with 5 or more years of service). Expected Crude Sample Rates* Disabilities** Age Disabilities Exposure Rates Old New Old New 25 and Under 15 2,678 0.0056 0.0018 0.0030 5 8 30-34 31 8,189 0.0038 0.0018 0.0030 15 25 35-39 33 11,354 0.0029 0.0025 0.0030 28 34 40-44 61 14,081 0.0043 0.0034 0.0034 49 49 45-49 86 17,233 0.0050 0.0045 0.0045 79 79 50-54 101 14,960 0.0068 0.0070 0.0070 102 102 55-59 103 10,099 0.0102 0.0106 0.0106 107 107 60 and over 42 2,279 0.0184 0.0170 0.0170 36 36 Totals 472 80,873 0.0058 0.0052 0.0054 421 440 Ref 213 506 1.0 1.05 * Sample rates are taken from midpoint of age group. ** Expected disabilities New is calculated as the sum of rates applied to exposure at individual ages. Expected disabilities Old is the sum of actual probabilities applied in the valuation. 0.020 0.018 0.016 0.014 0.012 0.010 0.008 0.006 0.004 0.002 0.000 25 and Under 30-34 35-39 40-44 45-49 50-54 55-59 60 and over Age Actual Experience Present Assumptions Proposed Assumptions Disability rates were computed by 5-year age groups. The proposed weighting of duty and ordinary disability continues to be 0%/100%. Missouri State Employees Retirement System F-2

SECTION G MORTALITY EXPERIENCE

MALE PRE-RETIREMENT MORTALITY EXPERIENCE (NORMAL RETIREMENT, ORIGINAL ANNUITANTS ONLY) Expected Crude Sample Rates* Deaths** Age Deaths Exposure Rates Old New Old New 25 and under 7 1,168 0.0060 0.0005 0.0005 1 1 30-34 5 4,313 0.0012 0.0007 0.0006 3 3 35-39 6 6,458 0.0009 0.0009 0.0009 6 6 40-44 21 8,352 0.0025 0.0014 0.0012 12 11 45-49 35 10,319 0.0034 0.0024 0.0021 26 23 50-54 39 11,834 0.0033 0.0044 0.0039 52 47 55-59 59 9,845 0.0060 0.0071 0.0065 69 63 60-64 31 5,290 0.0059 0.0109 0.0099 56 51 65 and over 11 1,920 0.0057 0.0177 0.0159 37 33 Totals 215 59,517 0.0036 0.0044 0.0040 262 236 Ref 152 152 * Sample rates are taken from midpoint of age group. ** Expected deaths New is calculated as the sum of rates applied to exposure at individual ages. Expected deaths Old is the sum of actual probabilities applied in the valuation. 0.0120 0.0100 0.0080 0.0060 0.0040 0.0020 0.0000 25 and under 30-34 35-39 40-44 45-49 50-54 55-59 60-64 Age Actual Experience Present Assumptions Proposed Assumptions Missouri State Employees Retirement System G-1

FEMALE PRE-RETIREMENT MORTALITY EXPERIENCE (NORMAL RETIREMENT, ORIGINAL ANNUITANTS ONLY) Expected Crude Sample Rates* Deaths** Age Deaths Exposure Rates Old New Old New 25 and under 2 2,678 0.0007 0.0004 0.0004 1 1 30-34 1 8,189 0.0001 0.0005 0.0004 4 4 35-39 9 11,354 0.0008 0.0006 0.0006 7 6 40-44 14 14,081 0.0010 0.0009 0.0008 12 11 45-49 19 17,355 0.0011 0.0012 0.0011 22 19 50-54 34 17,866 0.0019 0.0021 0.0017 38 30 55-59 36 13,346 0.0027 0.0039 0.0031 52 41 60-64 12 6,233 0.0019 0.0065 0.0054 39 32 65 and over 14 1,987 0.0070 0.0099 0.0083 20 17 Totals 141 93,089 0.0015 0.0021 0.0017 195 162 Ref 154 154 * Sample rates are taken from midpoint of age group. ** Expected deaths New is calculated as the sum of rates applied to exposure at individual ages. Expected deaths Old is the sum of actual probabilities applied in the valuation. 0.0070 0.0060 0.0050 0.0040 0.0030 0.0020 0.0010 0.0000 25 and under 30-34 35-39 40-44 45-49 50-54 55-59 60-64 Age Actual Experience Present Assumptions Proposed Assumptions Missouri State Employees Retirement System G-2

MALE RETIRED-LIFE MORTALITY EXPERIENCE (NORMAL RETIREMENT, ORIGINAL ANNUITANTS ONLY) There were 1,326 member deaths reported for the 4-year period and 36,252 life years of exposure included in the male retired-life mortality investigation. Crude Sample Rates* Expected Deaths** Age Deaths Exposure Rates Old New Old New 50-54 8 1,064 0.007519 0.004856 0.004374 6 5 55-59 60 4,731 0.012682 0.007666 0.007051 37 36 60-64 98 6,970 0.014060 0.011952 0.010858 85 81 65-69 144 7,421 0.019404 0.019741 0.017700 147 140 70-74 219 6,489 0.033749 0.034194 0.030680 220 209 75-79 228 4,750 0.048000 0.052857 0.048373 252 241 80-84 265 2,998 0.088392 0.086469 0.078749 253 242 85-89 181 1,281 0.141296 0.129938 0.120641 161 156 90-94 84 424 0.198113 0.182905 0.171309 75 73 95-99 31 106 0.292453 0.253249 0.237003 26 25 100 and over 8 16 0.500000 0.352455 0.329825 6 6 Totals 1,326 36,252 0.036577 0.035003 0.033515 1,269 1,215 * Sample rates are taken from midpoint of age group. ** Expected deaths New is calculated as the sum of rates applied to exposure at individual ages. Expected deaths Old is the sum of actual probabilities applied in the valuation. The proposed weighting of duty and ordinary deaths-in-service continues to be 2%/98%. 0.50 0.40 0.30 0.20 0.10 0.00 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95-99 100 and over Age Actual Experience Present Assumptions Proposed Assumptions Missouri State Employees Retirement System G-3

FEMALE RETIRED-LIFE MORTALITY EXPERIENCE (NORMAL RETIREMENT, ORIGINAL ANNUITANTS ONLY) There were 1,984 member deaths reported for the 4-year period and 63,737 life years of exposure included in the female retired-life mortality investigation. Crude Sample Rates* Expected Deaths** Age Deaths Exposure Rates Old New Old New 50-54 13 2,315 0.005616 0.002419 0.002746 6 7 55-59 54 7,620 0.007087 0.004374 0.004856 34 40 60-64 120 10,935 0.010974 0.007051 0.007666 78 89 65-69 198 12,029 0.016460 0.010858 0.011952 131 152 70-74 242 10,408 0.023251 0.017700 0.019741 185 218 75-79 293 8,710 0.033639 0.030680 0.034194 268 312 80-84 333 6,185 0.053840 0.048373 0.052857 298 343 85-89 366 3,685 0.099322 0.078749 0.086469 283 326 90-94 241 1,443 0.167013 0.120641 0.129938 169 189 95-99 111 373 0.297587 0.171309 0.182905 61 67 100 and over 13 34 0.382353 0.237003 0.253249 8 8 Totals 1,984 63,737 0.031128 0.023864 0.027472 1,521 1,751 * Sample rates are taken from midpoint of age group. ** Expected deaths New is calculated as the sum of rates applied to exposure at individual ages. Expected deaths Old is the sum of actual probabilities applied in the valuation. The proposed weighting of duty and ordinary deaths-in-service continues to be 2%/98%. 0.40 0.30 0.20 0.10 0.00 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95-99 100 and over Age Actual Experience Present Assumptions Proposed Assumptions Missouri State Employees Retirement System G-4

SECTION H MISCELLANEOUS AND TECHNICAL ASSUMPTIONS

PROPOSED MISCELLANEOUS AND TECHNICAL ASSUMPTIONS Marriage Assumption: Service Adjustment: Pay Increase Timing: Decrement Timing: Other Liability Adjustments: We recommend that the marriage assumption remain unchanged at 70% for purposes of death-in-service benefits. It is assumed that each member will be granted one half year of service credit, 2 months for unused leave upon retirement and 4 months for military service purchases. Middle of (Fiscal) year. Decrements of all types are assumed to occur mid-year. MSEP 2000 Benefits for Active Employees - Normal retirement form of payment adjustment: 0.994 - Early retirement form of payment adjustment: 0.993 MSEP Benefits for Current Retirees - Pop-Up Factor for 100% Survivor Benefits: 1.015 MSEP 2000 Benefits for Current Retirees - Pop-Up Factor for 50% Survivor Benefits: 1.02 - Pop-Up Factor for 100% Survivor Benefits: 1.035 Pre-Retirement Survivor Benefits for Spouse of Terminated Vested Member Age Male/Female <30 3.51/2.51 30-39 2.01/1.59 40-49 1.37/1.21 >50 1.09/1.05 MSEP 2000 Election: All regular state employees are assumed to elect MSEP 2000 at retirement. Elected Officials, General Assembly, and Uniformed Water Patrol Members hired before July 1, 2000 and Administrative Law Judges hired before April 26, 2005 are assumed to elect MSEP at retirement. Missouri State Employees Retirement System H-1

SECTION I NEW ASSUMPTION LISTING

ACTUARIAL ASSUMPTIONS BASED ON 2003-2007 EXPERIENCE STUDY SELECT AND ULTIMATE WITHDRAWAL Less than 5 Years of Service 5 or More Years of Service Service Age Male Female Index Male Female 20 & Under 0.1180 0.1090 1 0.2380 0.2690 21 0.1180 0.1090 2 0.1890 0.2050 22 0.1180 0.1090 3 0.1530 0.1540 23 0.1180 0.1090 4 0.1280 0.1250 24 0.1180 0.1090 5 0.1180 0.1090 25 0.1180 0.1090 Sw 521 522 26 0.1180 0.1090 27 0.1180 0.1090 28 0.1118 0.1060 29 0.1059 0.1032 30 0.1003 0.1004 31 0.0950 0.0976 32 0.0900 0.0950 33 0.0846 0.0883 34 0.0795 0.0821 35 0.0747 0.0764 36 0.0702 0.0710 37 0.0660 0.0660 38 0.0624 0.0624 39 0.0591 0.0591 40 0.0559 0.0559 41 0.0529 0.0529 42 0.0500 0.0500 43 0.0471 0.0481 44 0.0443 0.0462 45 0.0417 0.0444 46 0.0393 0.0427 47 0.0370 0.0410 48 0.0359 0.0402 49 0.0349 0.0394 50 0.0339 0.0386 51 0.0329 0.0378 52 0.0320 0.0370 53 0.0312 0.0355 54 0.0303 0.0340 55 0.0295 0.0326 56 0.0288 0.0313 57 0.0280 0.0300 58 0.0274 0.0300 59 0.0268 0.0300 60 0.0262 0.0300 61 0.0256 0.0300 62 & Over 0.0250 0.0300 Missouri State Employees Retirement System I-1

ACTUARIAL ASSUMPTIONS BASED ON 2003-2007 EXPERIENCE STUDY SERVICE BASED SALARY SCALE % Merit Increases in Salaries Next Year Age Rate 20 3.5% 21 3.4% 22 3.2% 23 3.1% 24 3.0% 25 2.9% 26 2.7% 27 2.6% 28 2.5% 29 2.3% 30 2.2% 31 2.0% 32 1.9% 33 1.8% 34 1.7% 35 1.6% 36 1.5% 37 1.4% 38 1.3% 39 1.3% 40 1.2% 41 1.2% 42 1.1% 43 1.0% 44 1.0% 45 0.9% 46 0.9% 47 0.8% 48 0.8% 49 0.7% 50 0.7% 51 0.6% 52 0.6% 53 0.6% 54 0.6% 55 0.5% 56 0.5% 57 0.5% 58 0.5% 59 0.5% 60 0.4% Ref 295 Missouri State Employees Retirement System I-2

ACTUARIAL ASSUMPTIONS BASED ON 2003-2007 EXPERIENCE STUDY NORMAL RETIREMENT PATTERN Grandfathered Groups MSEP 2000 Year of Eligibility Year of Eligibility Age 1st Year 2nd Year 3rd Year Age 1st Year 2nd Year 3rd Year 48 20% 48 27% 49 20% 10% 49 27% 14% 50 20% 10% 8% 50 27% 14% 18% 51 20% 10% 8% 51 27% 14% 18% 52 20% 10% 8% 52 27% 14% 18% 53 20% 10% 8% 53 27% 14% 18% 54 20% 10% 8% 54 27% 14% 18% 55 25% 10% 12% 55 27% 14% 25% 56 20% 10% 12% 56 27% 14% 25% 57 20% 10% 12% 57 22% 14% 20% 58 20% 10% 30% 58 22% 14% 20% 59 20% 10% 30% 59 22% 14% 20% 60 25% 10% 30% 60 25% 14% 25% 61 20% 10% 30% 61 20% 14% 20% 62 30% 15% 50% 62 20% 22% 35% 63 20% 12% 40% 63 15% 20% 30% 64 20% 12% 40% 64 20% 20% 20% 65 30% 15% 50% 65 25% 20% 30% 66 20% 12% 40% 66 20% 20% 25% 67 20% 12% 40% 67 20% 20% 20% 68 20% 12% 40% 68 20% 20% 20% 69 20% 12% 40% 69 20% 20% 20% 70 20% 12% 40% 70 20% 20% 20% 71 20% 12% 40% 71 20% 20% 20% 72 20% 12% 40% 72 20% 20% 20% 73 20% 12% 40% 73 20% 20% 20% 74 20% 12% 40% 74 20% 20% 20% 75 100% 100% 100% 75 50% 50% 50% 76 100% 100% 100% 76 50% 50% 50% 77 100% 100% 100% 77 75% 75% 75% 78 100% 100% 100% 78 100% 100% 100% Missouri State Employees Retirement System I-3

ACTUARIAL ASSUMPTIONS BASED ON 2003-2007 EXPERIENCE STUDY DISABILITY RATES % Becoming Disabled Age Male Female 20 0.16% 0.30% 21 0.16% 0.30% 22 0.16% 0.30% 23 0.16% 0.30% 24 0.16% 0.30% 25 0.16% 0.30% 26 0.16% 0.30% 27 0.16% 0.30% 28 0.16% 0.30% 29 0.16% 0.30% 30 0.16% 0.30% 31 0.19% 0.30% 32 0.19% 0.30% 33 0.19% 0.30% 34 0.19% 0.30% 35 0.21% 0.30% 36 0.21% 0.30% 37 0.21% 0.30% 38 0.23% 0.30% 39 0.26% 0.30% 40 0.26% 0.32% 41 0.28% 0.33% 42 0.30% 0.35% 43 0.31% 0.36% 44 0.33% 0.37% 45 0.34% 0.38% 46 0.38% 0.41% 47 0.40% 0.45% 48 0.42% 0.51% 49 0.44% 0.56% 50 0.49% 0.57% 51 0.56% 0.63% 52 0.66% 0.70% 53 0.80% 0.74% 54 0.92% 0.83% 55 1.07% 0.89% 56 1.17% 0.95% 57 1.27% 1.06% 58 1.34% 1.20% 59 1.43% 1.35% 60 1.50% 1.50% 61 1.55% 1.60% 62 1.58% 1.70% 63 1.60% 1.70% 64 1.60% 1.70% 65 1.60% 1.70% Missouri State Employees Retirement System I-4

ACTUARIAL ASSUMPTIONS BASED ON 2003-2007 EXPERIENCE STUDY POST RETIREMENT MORTALITY RATES % Dying Next Year % Dying Next Year Age Male Female Age Male Female 50 0.3499% 0.2126% 81 7.1362% 4.8373% 51 0.3923% 0.2419% 82 7.8749% 5.2857% 52 0.4374% 0.2746% 83 8.6469% 5.8349% 53 0.4856% 0.3107% 84 9.4487% 6.4629% 54 0.5363% 0.3499% 85 10.2932% 7.1362% 55 0.5899% 0.3923% 86 11.1657% 7.8749% 56 0.6461% 0.4374% 87 12.0641% 8.6469% 57 0.7051% 0.4856% 88 12.9938% 9.4487% 58 0.7666% 0.5363% 89 13.9513% 10.2932% 59 0.8309% 0.5899% 90 14.9547% 11.1657% 60 0.9013% 0.6461% 91 16.0121% 12.0641% 61 0.9869% 0.7051% 92 17.1309% 12.9938% 62 1.0858% 0.7666% 93 18.2905% 13.9513% 63 1.1952% 0.8309% 94 19.4779% 14.9547% 64 1.3130% 0.9013% 95 20.6895% 16.0121% 65 1.4413% 0.9869% 96 22.1338% 17.1309% 66 1.5926% 1.0858% 97 23.7003% 18.2905% 67 1.7700% 1.1952% 98 25.3249% 19.4779% 68 1.9741% 1.3130% 99 27.0904% 20.6895% 69 2.2037% 1.4413% 100 29.0163% 22.1338% 70 2.4514% 1.5926% 101 30.9125% 23.7003% 71 2.7400% 1.7700% 102 32.9825% 25.3249% 72 3.0680% 1.9741% 103 35.2455% 27.0904% 73 3.4194% 2.2037% 104 37.7220% 29.0163% 74 3.7677% 2.4514% 105 40.6205% 30.9125% 75 4.1064% 2.7400% 106 44.1497% 32.9825% 76 4.4550% 3.0680% 107 48.5182% 35.2455% 77 4.8373% 3.4194% 108 53.9343% 37.7220% 78 5.2857% 3.7677% 109 60.6069% 40.6205% 79 5.8349% 4.1064% 110 100.0000% 100.0000% 80 6.4629% 4.4550% Ref #152sb2x1 #154sb1x1 Post Disabled mortality is set forward 10 years. Missouri State Employees Retirement System I-5

ACTUARIAL ASSUMPTIONS BASED ON 2003-2007 EXPERIENCE STUDY PRE RETIREMENT MORTALITY RATES % Dying Next Year Age Male Female 20 0.0378% 0.0323% 21 0.0390% 0.0329% 22 0.0402% 0.0335% 23 0.0416% 0.0342% 24 0.0432% 0.0349% 25 0.0450% 0.0358% 26 0.0468% 0.0367% 27 0.0489% 0.0378% 28 0.0512% 0.0390% 29 0.0538% 0.0402% 30 0.0566% 0.0416% 31 0.0598% 0.0432% 32 0.0632% 0.0450% 33 0.0670% 0.0468% 34 0.0712% 0.0489% 35 0.0758% 0.0512% 36 0.0809% 0.0538% 37 0.0866% 0.0566% 38 0.0929% 0.0598% 39 0.0997% 0.0632% 40 0.1072% 0.0670% 41 0.1156% 0.0712% 42 0.1249% 0.0758% 43 0.1352% 0.0809% 44 0.1481% 0.0866% 45 0.1655% 0.0929% 46 0.1871% 0.0997% 47 0.2126% 0.1072% 48 0.2419% 0.1156% 49 0.2746% 0.1249% 50 0.3107% 0.1352% 51 0.3499% 0.1481% 52 0.3923% 0.1655% 53 0.4374% 0.1871% 54 0.4856% 0.2126% 55 0.5363% 0.2419% 56 0.5899% 0.2746% 57 0.6461% 0.3107% 58 0.7051% 0.3499% 59 0.7666% 0.3923% 60 0.8309% 0.4374% 61 0.9013% 0.4856% 62 0.9869% 0.5363% 63 1.0858% 0.5899% 64 1.1952% 0.6461% 65 1.3130% 0.7051% Ref #152sb3x1 #154sb5x1 Missouri State Employees Retirement System I-6

INVESTMENT POLICY ASSUMPTIONS PROVIDED BY MOSERS STAFF Missouri State Employees Retirement System I-7

SECTION J GLOSSARY

GLOSSARY The following glossary is intended to provide definitions of a number of terms which are used throughout this report and which are somewhat unique to the discussion of an Experience Study. Actuarial Decrement. The actual number of decrements which occurred during the study. This number is a straight tabulation of the actual number of occurrences of the particular decrement in question. Normally, the actual number of decrements will be subdivided by age and sex, and possibly by service. Aggregate Assumptions. Assumptions which vary only by sex and/or age. The impact of year of service on the decrement is ignored. All experience is combined by age and/or sex without regard to service. Rates of death and disablement are more appropriate to aggregate measurement in a retirement system. Crude Rate of Decrement. The rate of decrement determined by dividing the actual number of the respective decrement for that age (and service) and sex by the corresponding exposure for that age (and service) and sex. The rate is described as a crude rate because no smoothing or elimination of statistical fluctuations has been made. It is indicative of the underlying true rate of the decrement and is the basis used in graduation to obtain the graduated or tabular rate. Decrements. The decrements are the means by which a member ceases to be a member. For active members, the decrements are death, withdrawal, service retirement, and disability retirement. For retired members, the only decrement is death. The purpose of the Experience Study is to determine the underlying rates of each decrement. Expected Decrement. This is the number of occurrences of a given decrement expected to occur for a given age (and service) and sex based on the number of lives exposed to the risk of the particular decrement and the current assumed rate for that decrement. It may also be referred to as the tabular number of decrements. It is the number of deaths, withdrawals, retirements, or disabilities (whichever is applicable) that would have actually occurred had the actuarial assumptions been exactly realized. Missouri State Employees Retirement System J-1

Exposure. The number of lives exposed to a given risk of decrement for a particular age (and service) and sex. It represents the number of members who could have potentially died, retired, become disabled, or withdrawn at that particular age (and service) and for that particular sex. This term will also be described as the number exposed to a given risk. Graduated Rates. Graduation is the mathematical process by which a set of crude rates of a particular type is translated into graduated or tabular rates. The graduation process attempts to smooth out statistical fluctuations and to arrive at a set of rates that adequately fit the underlying actual experience of the crude rates that are being graduated. The graduation process involves smoothing the results, but at the same time trying to fit the results to be consistent with the original data. It requires that the actuary exercise his or her judgment in what the underlying shape of the risk curve should look like. Interpolated Rates. For the active rates of decrement (death, disability, retirement, and withdrawal), the actuary will develop graduated rates based on quinquennial age groupings (see definition). To arrive at the rates of decrement for ages between two quinquennial ages, the graduated quinquennial rates must be interpolated for these intermediate ages. The interpolated results are arrived at by applying a mathematical interpolation formula to the quinquennial graduated rates. Merit and Longevity Pay Increase Rate. The portion of the total salary scale which varies by service. It reflects the impact of moving up the salary grid in a given year, rather than the increase in the overall grid. It includes the salary increase associated with promotions during the year. Quinquennial Age Groupings. For the active decrements, it is preferable to group the experience in five-year age groups for graduation and analysis purposes so as to minimize statistical fluctuations resulting from a lack of exposure which may occur for individual ages. Quinquennial age grouping is the five-year age grouping which is used to develop the graduated rates of decrement for active membership. The quinquennial age is the central age of the five-year grouping. Select and Ultimate Assumptions. Assumptions which vary by years of service in addition to sex and/or age. In a retirement system you might expect service to be a factor in the rates of withdrawal, retirement, and salary increase. Missouri State Employees Retirement System J-2