Postretirement Benefit Valuation Report Under GASB 45 for Fiscal Year Ending October 31, 2010

December 14, 2010 Postretirement Benefit Valuation Report Under GASB 45 for Fiscal Year Ending October 31, 2010 New York State Housing Finance Agency State of New York Mortgage Agency New York State Affordable Housing Corporation

Contents Report Highlights... 1 Important Notices... 3 Valuation Results... 6 Supplemental Information... 9 Participant Data... 10 Actuarial Basis... 16 Summary of Plan Provisions...22 \\pctwpfs01\data1\hgb\nyshfa\2010\report\rpt nyshfa 2010.doc Mercer i NYSHFA, SONYMA and AHC December 14, 2010

Report Highlights Mercer has prepared this report exclusively for the New York State Housing Finance Agency (NYSHFA), State of New York Mortgage Agency (SONYMA) and New York State Affordable Housing Corporation (AHC). The purpose of this report is to present Mercer s actuarial estimates of the NYSHFA, SONYMA and AHC Plans liabilities and expenses under Governmental Accounting Standards Board (GASB) Statement No. 45. Summary of GASB Statement No. 45 In June 2004 the Governmental Accounting Standards Board (GASB) issued Statement No. 45: Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, which established new accounting standards for Postretirement Benefits Other Than Pensions (OPEB). The requirements apply to any state or local government employer that provides OPEB. The primary type of OPEB covered by the statement will be postretirement health benefits. OPEB may also include life insurance, legal benefits, and other benefits. Most governmental employers had been accounting for OPEB on a pay-as-you-go basis. GASB 45 requires accrual based accounting. It does not require funding of OPEB expense, but any differences between the annual expense and the amount funded in a year are recorded in the employer s financial statement as an increase (or decrease) in the net OPEB obligation. The funded status of the actuarial accrued liability is shown as part of Required Supplementary Information. NYSHFA, SONYMA, and AHC adopted GASB 45 for the fiscal year ending October 31, 2006. Calculation Details Funding Methods Any of six actuarial cost methods can be used. These are the same methods that are permitted by GASB 27 for calculating employer pension expense. Upon adoption of GASB 45, NYSHFA, SONYMA, and AHC selected the projected unit credit method for cost calculations. The unfunded actuarial accrued liability must be amortized over a period of not greater than 30 years. The amortization amount may be computed as a level dollar amount or as a level percentage of payroll on an open or closed basis. NYSHFA, SONYMA, and AHC use a level dollar amount and an amortization period of ten years on an open basis. Because the unfunded actuarial accrued liability (UAAL) is being amortized by an open or rolling amortization period (with re-amortization of the UAAL in each valuation), the amortization amounts will never fully eliminate the UAAL. Assumptions The investment return assumption (or discount rate) is to be selected as the estimated long-term investment return on the investments that are expected to be used to finance the payment of benefits. For funded plans, the considerations in selecting this rate would be similar to selecting the funding interest rate for a pension plan. However, for unfunded plans, the discount rate should be determined with reference to the employer s general assets. In many instances, governmental unrestricted general assets might be invested in very short-term fixed instruments, such as money market funds. If the plan is partially funded, a blended discount rate may be used. The NYSHFA, SONYMA and AHC plans are unfunded and NYSHFA, SONYMA and AHC have selected a discount rate of 4.00%. This is change from the prior valuation assumption of 4.25%. The claim cost assumptions have been updated to reflect actual 2010 premium rates. Mercer 1 NYSHFA, SONYMA and AHC December 14, 2010

Report Highlights (continued) All other assumptions are unchanged from the prior valuation. The decrement and vesting participation assumptions reflect mortality, turnover and retirement rate assumptions and vesting participation assumptions in the report "Development of Recommended Assumptions for New York State/SUNY GASB 45 Valuation - Participating Agency Version" dated May 21, 2009 and issued by Buck Consultants. They are unchanged from the prior Buck report. We are unable to judge the reasonableness of these assumptions without performing a substantial amount of additional work beyond the scope of the assignment and did not do so. Early Retirement Window This report reflects effects of the early retirement window that was offered to employees in fiscal 2010. Healthcare Reform This report does not reflect any effects of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act that were enacted in March 2010. Expense Calculation The basic annual expense recognized under GASB 45 is called the annual required contribution or ARC, even though there is no requirement to fund this amount. The ARC depends on the actuarial cost method selected and typically consists of the normal cost plus amortization of the UAAL, or the excess of the past service liability over the actuarial value of assets. The net OPEB obligation that is created by an unfunded ARC will also cause an adjustment to the ARC to determine the expense for subsequent years. The table below presents the UAAL, ARC, total annual OPEB cost (expense), and expected pay-as-yougo costs for the fiscal year ending October 31, 2010. These amounts have been developed from obligations calculated using census data provided in October 2010 and rolled back to November 1, 2009 using standard actuarial techniques. NYSHFA AHC SONYMA UAAL (beginning of year) $ 21.7 $ 6.3 $ 25.5 ARC $ 3.1 $ 1.4 $ 4.6 Annual OPEB Cost (expense) $ 1.2 $ 0.9 $ 2.5 Pay-As-You-Go Cost $ 0.5 $ 0.0 $ 0.4 The UAAL is approximately 12.5% higher than would have been expected based on the prior valuation. This increase is primarily due to the combined effects of increases resulting from updated census data and updated premium rates. The increase due to census data alone is approximately 9.5%. The mortality, withdrawal, and retirement rates and vested participation rates are those developed by Buck Consultants for their GASB 45 valuation for New York State/SUNY. Detailed breakouts by organization are provided in the Valuation Results section of this report. The differences between the amounts required to be recognized and the amounts funded (including benefits paid from general assets) are accumulated as the net OPEB obligation. The annual OPEB cost must be reported in the employer s financial statements as an expense item. Mercer 2 NYSHFA, SONYMA and AHC December 14, 2010

Important Notices Mercer has prepared this report exclusively for NYSHFA, SONYMA, and AHC; Mercer is not responsible for reliance upon this report by any other party. Subject to this limitation, they may direct that this report be provided to their auditors. The only purpose of this report is to present Mercer s actuarial estimates of the Plan s liabilities and expenses for NYSHFA, SONYMA and AHC to incorporate, as they deems appropriate, in their financial statements. This report may not be used for any other purpose; Mercer is not responsible for the consequences of any unauthorized use. Decisions about benefit changes, granting new benefits, investment policy, funding policy, benefit security and/or benefit-related issues should not be made on the basis of this valuation, but only after careful consideration of alternative economic, financial, demographic and societal factors, including financial scenarios that assume future sustained investment losses. The NYSHFA, SONYMA and AHC are solely responsible for selecting the plan s investment policies, asset allocations and individual investments. Mercer s actuaries have not provided any investment advice to them. A valuation report is only a snapshot of a Plan s estimated financial condition at a particular point in time; it does not predict the Plan s future financial condition or its ability to pay benefits in the future and does not provide any guarantee of future financial soundness of the Plan. Over time, a plan s total cost will depend on a number of factors, including the amount of benefits the plan pays, the number of people paid benefits, the period of time over which benefits are paid, plan expenses and the amount earned on any assets invested to pay benefits. These amounts and other variables are uncertain and unknowable at the valuation date. Because modeling all aspects of a situation is not possible or practical, we may use summary information, estimates, or simplifications of calculations to facilitate the modeling of future events in an efficient and cost-effective manner. We may also exclude factors or data that are immaterial in our judgment. Use of such simplifying techniques does not, in our judgment, affect the reasonableness of valuation results for the plan. To prepare the valuation report, actuarial assumptions, as described in the Summary of Actuarial Assumptions, are used in a forward looking financial and demographic model to present a single scenario from a wide range of possibilities; the results based on that single scenario are included in the valuation. The future is uncertain and the plan s actual experience will differ from those assumptions; these differences may be significant or material because these results are very sensitive to the assumptions made and, in some cases, to the interaction between the assumptions. Different assumptions or scenarios within the range of possibilities may also be reasonable and results based on those assumptions would be different. As a result of the uncertainty inherent in a forward looking projection over a very long period of time, no one projection is uniquely correct and many alternative projections of the future could also be regarded as reasonable. Two different actuaries could, quite reasonably, arrive at different results based on the same data and different views of the future. A "sensitivity analysis" shows the degree to which results would be different if you substitute alternative Mercer 3 NYSHFA, SONYMA and AHC December 14, 2010

Important Notices (continued) assumptions within the range of possibilities for those utilized in this report. We have not been engaged to perform such a sensitivity analysis and thus the results of such an analysis are not included in this report. At NYSHFA, SONYMA, or AHC's request, Mercer is available to perform such a sensitivity analysis. Actuarial assumptions may also be changed from one valuation to the next because of changes in mandated requirements, plan experience, changes in expectations about the future and other factors. A change in assumptions is not an indication that prior assumptions were unreasonable when made. Because valuations are a snapshot in time and are based on estimates and assumptions that are not precise and will differ from actual experience, contribution calculations are inherently imprecise. There is no uniquely correct level of contributions for the coming plan year. Valuations do not affect the ultimate cost of the Plan, only the timing of contributions into the Plan. Plan funding occurs over time. Contributions not made this year, for whatever reason, including errors, remain the responsibility of the Plan sponsor and can be made in later years. If the contribution levels over a period of years are lower or higher than necessary, it is normal and expected practice for adjustments to be made to future contribution levels to take account of this with a view to funding the plan over time. Data, computer coding and mathematical errors are possible in the preparation of a valuation involving complex computer programming and thousands of calculations and data inputs. Errors in a valuation discovered after its preparation may be corrected by amendment to the valuation or in a subsequent year s valuation. The mortality, turnover and retirement rate assumptions and vested participation assumptions reflect those in the report "Development of Recommended Assumptions for New York State/SUNY GASB 45 Valuation - Participating Agency Version" dated May 21, 2009 and issued by Buck Consultants. We are unable to judge the reasonableness of these assumptions without performing a substantial amount of additional work beyond the scope of the assignment and did not do so. NYSHFA, SONYMA and AHC are responsible for selecting the plan s funding policy, actuarial valuation methods, asset valuation methods, and assumptions. The policies, methods and assumptions used in this valuation are those that have been so prescribed and are described in the Actuarial Basis Section of the Report. The NYSHFA, SONYMA and AHC are solely responsible for communicating to Mercer any changes required thereto. To prepare this report Mercer has used and relied on financial data and participant data supplied by NYSHFA, SONYMA and AHC and summarized in the valuation report in the Participation Data Section of the Report. NYSHFA, SONYMA and AHC are responsible for ensuring that such participant data provides an accurate description of all persons who are participants under the terms of the plan or otherwise entitled to benefits as of October 31, 2010 that is sufficiently comprehensive and accurate for the purposes of this report. Although Mercer has reviewed the data in accordance with Actuarial Standards of Practice No. 23, Mercer has not verified or audited any of the data or information provided. Mercer has also used and relied on the plan documents, including amendments, and interpretations of plan provisions, supplied by NYSHFA, SONYMA and AHC are as summarized in the valuation report in the Summary of the Plan Provisions. We have assumed for purposes of this valuation that copies of any official plan document including all amendments and collective bargaining agreements as well as any interpretations of any such document have been provided to Mercer along with a written summary of any other substantive commitments. NYSHFA, SONYMA and AHC are solely responsible for the validity, accuracy and comprehensiveness of this information. If any data or plan provisions supplied are not Mercer 4 NYSHFA, SONYMA and AHC December 14, 2010

Important Notices (continued) accurate and complete, the valuation results may differ significantly from the results that would be obtained with accurate and complete information; this may require a later revision of this report. Moreover, plan documents may be susceptible to different interpretations, each of which could be reasonable, and that the different interpretations could lead to different valuation results. NYSHFA, SONYMA and AHC should notify Mercer promptly after receipt of the valuation report if they disagree with anything contained in the valuation report or are aware of any information that would affect the results of the valuation report that has not been communicated to Mercer or incorporated therein. The valuation report will be deemed final and acceptable to NYSHFA, SONYMA and AHC unless they promptly provide such notice to Mercer. Professional qualifications We are available to answer any questions on the material in this report or to provide explanations or further details as appropriate. The undersigned credentialed actuaries meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained in this report. We are not aware of any direct or material indirect financial interest or relationship, including investments or other services that could create a conflict of interest, that would impair the objectivity of our work. William E. Hopkins, Jr., ASA, MAAA (Healthcare Aspect Assumptions) Mercer 212 Carnegie Center, 4 th Floor Princeton, NJ 08540-6236 609 520 2500 Date 12/14/2010 Kraig M. Kummer, FSA (Long Term Aspect Assumptions) Mercer 70 Linden Oaks, Suite 310 Rochester, NY 14625 585 389 8701 Date 12/14/2010 The information contained in this document (including any attachments) is not intended by Mercer to be used, and it cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code that may be imposed on the taxpayer. Mercer 5 NYSHFA, SONYMA and AHC December 14, 2010

Valuation Results Summary of Liabilities, Projected Benefit Payments, and Enrollment NYSHFA AHC SONYMA Combined Benefit Obligations Actuarial Accrued Liability as of November 1, 2009 at 4.25% Retired employees $ 13,188,000 $ 1,013,000 $ 11,083,000 $ 25,284,000 Vested employees 566,000 0 0 566,000 Active employees 7,991,000 5,311,000 14,378,000 27,680,000 Total $ 21,745,000 $ 6,324,000 $ 25,461,000 $ 53,530,000 Normal Cost at Beginning of Fiscal Year at 4.25% $ 343,000 $ 629,000 $ 1,349,000 $ 2,321,000 Projected Benefit Payments Fiscal Year 2010 (November 1, 2009- October 31, 2010) $ 522,000 $ 34,000 $ 376,000 $ 932,000 Fiscal Year 2011 (November 1, 2010- October 31, 2011) 576,000 43,000 433,000 1,052,000 Actuarial Accrued Liability as of October 31, 2010 at 4.25% $ 22,494,000 $ 7,214,000 $ 27,565,000 $ 57,273,000 Actuarial Accrued Liability as of October 31, 2010 at 4.0% $ 23,418,000 $ 7,634,000 $ 28,911,000 $ 59,963,000 Enrollment Covered Participants as of October 31, 2010 Active employees 33 50 105 188 Vested employees 5 0 1 6 Retired employees and widow(er)s 61 5 45 111 Spouses of retired employees 28 1 21 50 Total 127 56 172 355 Mercer 6 NYSHFA, SONYMA and AHC December 14, 2010

Valuation Results (continued) Fiscal year ending October 31, 2010 Accounting Results under the Projected Unit Credit Actuarial Cost Method with Amortization of UAAL over ten years Reflecting a discount rate of 4.25% and actual benefit payments NYSHFA AHC SONYMA Combined Calculation of ARC and Annual OPEB Cost 1. Unfunded actuarial accrued liability (UAAL) at 11/1/2009 $ 21,745,000 $ 6,324,000 $ 25,461,000 $ 53,530,000 2. Amortization factor based on ten years 8.011 8.011 8.011 n/a 3. Amortization of UAAL over ten years ( 1. 2. ) $ 2,714,000 $ 789,000 $ 3,178,000 $ 6,681,000 4. Normal Cost at beginning of year $ 343,000 $ 629,000 $ 1,349,000 $ 2,321,000 5. Interest on Normal Cost 15,000 27,000 57,000 99,000 6. Normal Cost with interest to end of year ( 4. + 5. ) $ 358,000 $ 656,000 $ 1,406,000 $ 2,420,000 7. Annual Required Contribution (3. + 6.) $ 3,072,000 $ 1,445,000 $ 4,584,000 $ 9,101,000 8. Interest on Net OPEB obligation $ 968,000 $ 292,000 $ 1,102,000 $ 2,362,000 9. Adjustment to ARC (2,842,000) (858,000) (3,236,000) (6,936,000) 10. Total annual OPEB cost (7.+8.+9.) $ 1,198,000 $ 879,000 $ 2,450,000 $ 4,527,000 Calculation of Net OPEB Obligation 11. Net OPEB Obligation at October 31, 2009 $ 22,766,000 $ 6,873,000 $ 25,925,000 $ 55,564,000 12. Total annual OPEB cost 1,198,000 879,000 2,450,000 4,527,000 13. Actual contributions 546,000 29,000 323,000 898,000 14. Estimated Net OPEB obligation at October 31, 2010 $ 23,418,000 $ 7,723,000 $ 28,052,000 $ 59,193,000 (11. +12. -13.) Mercer 7 NYSHFA, SONYMA and AHC December 14, 2010

Valuation Results (continued) Fiscal year ending October 31, 2011 (Projected) Accounting Results under the Projected Unit Credit Actuarial Cost Method with Amortization of UAAL over ten years Reflecting a change in discount rate from 4.25% to 4.0% at October 31, 2010 and estimated benefit payments NYSHFA AHC SONYMA Combined Calculation of ARC and Annual OPEB Cost 1. Unfunded actuarial accrued liability (UAAL) at 11/1/2010 $ 23,418,000 $ 7,634,000 $ 28,911,000 $ 59,963,000 2. Amortization factor based on ten years 8.111 8.111 8.111 n/a 3. Amortization of UAAL over ten years ( 1. 2. ) $ 2,887,000 $ 941,000 $ 3,564,000 $ 7,392,000 4. Normal Cost at beginning of year $ 378,000 $ 699,000 $ 1,494,000 $ 2,571,000 5. Interest on Normal Cost 15,000 28,000 60,000 103,000 6. Normal Cost with interest to end of year ( 4. + 5. ) $ 393,000 $ 727,000 $ 1,554,000 $ 2,674,000 7. Annual Required Contribution (3. + 6.) $ 3,280,000 $ 1,668,000 $ 5,118,000 $ 10,066,000 8. Interest on Net OPEB obligation $ 937,000 $ 309,000 $ 1,122,000 $ 2,368,000 9. Adjustment to ARC (2,887,000) (952,000) (3,459,000) (7,298,000) 10. Total annual OPEB cost (7.+8.+9.) $ 1,330,000 $ 1,025,000 $ 2,781,000 $ 5,136,000 Calculation of Net OPEB Obligation 11. Net OPEB Obligation at October 31, 2010 $ 23,418,000 $ 7,723,000 $ 28,052,000 $ 59,193,000 12. Total annual OPEB cost 1,330,000 1,025,000 2,781,000 5,136,000 13. Estimated contributions 576,000 43,000 433,000 1,052,000 14. Estimated Net OPEB obligation at October 31, 2011 $ 24,172,000 $ 8,705,000 $ 30,400,000 $ 63,277,000 (11. +12. -13.) Mercer 8 NYSHFA, SONYMA and AHC December 14, 2010

Supplemental Information The remainder of the report includes information supporting the results presented in the previous section. Participant data presents and describes the participant data used in the valuation. Actuarial basis describes the plan provisions, as well as the methods and assumptions used to value the plan. The actuarial assumptions are unchanged from the prior valuation, except for the claim costs which have been updated to reflect actual 2010 premium rates. The valuation is based on the premise that the plan is ongoing. Mercer 9 NYSHFA, SONYMA and AHC December 14, 2010

Participant Data Distribution of NYSHFA Active Participants as of October 31, 2010 Years of Service as of October 31, 2010 Age 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40 + Total Under 20 0 0 0 0 0 0 0 0 0 0 20-24 0 0 0 0 0 0 0 0 0 0 25-29 0 0 0 0 0 0 0 0 0 0 30-34 0 0 0 0 0 0 0 0 0 0 35-39 0 0 0 0 0 0 0 0 0 0 40-44 1 0 0 0 0 0 0 0 0 1 45-49 0 0 0 2 1 0 0 0 0 3 50-54 0 0 1 2 4 5 2 0 0 14 55-59 0 0 0 1 8 0 3 0 0 12 60-64 0 0 0 0 3 0 0 0 0 3 65-69 0 0 0 0 0 0 0 0 0 0 70-74 0 0 0 0 0 0 0 0 0 0 75 + 0 0 0 0 0 0 0 0 0 0 Total 1 0 1 5 16 5 5 0 0 33 % Male 100% NA 0% 40% 38% 80% 40% NA NA 45% Statistics for NYSHFA Active Participants Average Number Age Service Fully Eligible 15 57.9 24.2 Not Fully Eligible 18 51.2 22.1 Total 33 54.2 23.0 Mercer 10 NYSHFA, SONYMA and AHC December 14, 2010

Participant Data Distribution of AHC Active Participants as of October 31, 2010 Years of Service as of October 31, 2010 Age 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40 + Total Under 20 0 0 0 0 0 0 0 0 0 0 20-24 0 0 0 0 0 0 0 0 0 0 25-29 2 2 0 0 0 0 0 0 0 4 30-34 6 1 1 0 0 0 0 0 0 8 35-39 3 0 0 1 0 0 0 0 0 4 40-44 1 0 2 0 2 0 0 0 0 5 45-49 1 1 2 0 2 0 0 0 0 6 50-54 5 1 2 1 4 1 0 0 0 14 55-59 1 2 0 0 2 0 0 0 0 5 60-64 2 0 0 2 0 0 0 0 0 4 65-69 0 0 0 0 0 0 0 0 0 0 70-74 0 0 0 0 0 0 0 0 0 0 75 + 0 0 0 0 0 0 0 0 0 0 Total 21 7 7 4 10 1 0 0 0 50 % Male 62% 29% 29% 50% 50% 100% NA NA NA 50% Statistics for AHC Active Participants Average Number Age Service Fully Eligible 6 60.1 15.8 Not Fully Eligible 44 43.7 9.0 Total 50 45.6 9.8 Mercer 11 NYSHFA, SONYMA and AHC December 14, 2010

Participant Data Distribution of SONYMA Active Participants as of October 31, 2010 Years of Service as of October 31, 2010 Age 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40 + Total Under 20 0 0 0 0 0 0 0 0 0 0 20-24 1 0 0 0 0 0 0 0 0 1 25-29 3 2 0 0 0 0 0 0 0 5 30-34 3 3 2 0 0 0 0 0 0 8 35-39 3 2 2 0 0 0 0 0 0 7 40-44 1 2 3 1 3 1 0 0 0 11 45-49 6 2 6 1 5 2 0 0 0 22 50-54 4 3 3 0 5 3 1 0 0 19 55-59 6 1 3 2 5 1 0 0 0 18 60-64 3 0 3 0 4 1 0 0 0 11 65-69 0 0 0 1 2 0 0 0 0 3 70-74 0 0 0 0 0 0 0 0 0 0 75 + 0 0 0 0 0 0 0 0 0 0 Total 30 15 22 5 24 8 1 0 0 105 % Male 40% 53% 36% 40% 42% 38% 0% NA NA 41% Statistics for SONYMA Active Participants Average Number Age Service Fully Eligible 23 60.2 18.8 Not Fully Eligible 82 45.3 10.9 Total 105 48.5 12.6 Mercer 12 NYSHFA, SONYMA and AHC December 14, 2010

Participant Data Distribution of NYSHFA Inactive Participants as of October 31, 2010 As of October 31, 2010 Surviving Age Retirees Spouses Spouses Total <50 0 0 0 0 50-55 1 2 0 3 55-60 7 5 0 12 60-65 11 4 0 15 65-70 13 7 1 21 70-75 5 2 1 8 75-80 7 3 1 11 80-85 4 2 2 8 85-90 6 3 1 10 >90 0 0 1 1 Total 54 28 7 89 % Male 59% 21% 14% 44% Statistics for NYSHFA Inactive Participants Number Average Under Age 65 Under Age 65 Age 65 and Over Total Age 65 and Over Total Retirees 19 35 54 60.2 75.6 70.1 Spouses 11 17 28 57.7 75.0 68.2 Surviving Spouses 0 7 7 N/A 80.8 80.8 Total 30 59 89 59.3 76.0 70.4 This data does not include five vested employees. Mercer 13 NYSHFA, SONYMA and AHC December 14, 2010

Participant Data Distribution of AHC Inactive Participants as of October 31, 2010 As of October 31, 2010 Surviving Age Retirees Spouses Spouses Total <50 0 0 0 0 50-55 0 0 0 0 55-60 0 1 0 1 60-65 1 0 0 1 65-70 2 0 0 2 70-75 1 0 0 1 75-80 1 0 0 1 80-85 0 0 0 0 85-90 0 0 0 0 >90 0 0 0 0 Total 5 1 0 6 % Male 20% 0% NA 17% Statistics for AHC Inactive Participants Number Average Under Age 65 Under Age 65 Age 65 and Over Total Age 65 and Over Total Retirees 1 4 5 62.2 70.9 69.2 Spouses 1 0 1 59.4 N/A 59.4 Surviving Spouses 0 0 0 N/A N/A N/A Total 2 4 6 60.8 70.9 67.5 Mercer 14 NYSHFA, SONYMA and AHC December 14, 2010

Participant Data Distribution of SONYMA Inactive Participants as of October 31, 2010 As of October 31, 2010 Surviving Age Retirees Spouses Spouses Total <50 0 0 0 0 50-55 0 2 0 2 55-60 6 3 0 9 60-65 9 7 2 18 65-70 9 7 2 18 70-75 4 1 3 8 75-80 5 0 2 7 80-85 2 1 0 3 85-90 0 0 1 1 >90 0 0 0 0 Total 35 21 10 66 % Male 54% 33% 20% 42% Statistics for SONYMA Inactive Participants Number Average Under Age 65 Under Age 65 Age 65 and Over Total Age 65 and Over Total Retirees 15 20 35 60.1 72.1 66.9 Spouses 12 9 21 59.8 69.3 63.9 Surviving Spouses 2 8 10 63.2 74.6 72.3 Total 29 37 66 60.2 71.9 66.8 This data does not include one vested employee. Mercer 15 NYSHFA, SONYMA and AHC December 14, 2010

Actuarial Basis Accounting Actuarial Cost Method and Policies Actuarial cost method: Liabilities shown in this report are computed using the projected unit credit method with attribution to each decrement age. The objective under this method is to expense each participant s benefits under the Plan as they would accrue. Thus, the total benefit to which each participant is expected to become entitled at retirement is broken down into units, each associated with a year of past or future credited service. A description of the calculation follows: An individual s accrued benefit for valuation purposes is the projected benefit at retirement date, multiplied by the ratio of service at the valuation date over service at retirement date. Service for this purpose is measured from date of hire. The benefit deemed to accrue for an individual during a plan year is the excess of the accrued benefit for valuation purposes at the end of the plan year over the accrued benefit for valuation purposes at the beginning of the plan year. Both accrued benefits are calculated from the same projections to the various anticipated separation dates. An individual s benefit obligation is the present value of the accrued benefit for valuation purposes at the beginning of the plan year, and the service cost is the present value of the benefit deemed to accrue in the plan year. If multiple decrements are used, the benefit obligation and the service cost for an individual are the sum of the component benefit obligations and service costs associated with the various anticipated separation dates. Such benefit obligations and service costs reflect the accrued benefits as modified to obtain the benefits payable on those dates and the probability of the individual separating on those dates. The vested benefit obligation is based on the expected date of separation. The Plan s service cost is the sum of the individual service costs, and the Plan s unfunded actuarial accrued liability (UAAL) is the sum of the benefit obligations for all participants under the Plan. Unfunded Actuarial Liability amortization method: Level dollar amount over ten years on an open basis. Because the unfunded actuarial liability (UAL) is being amortized by an open or rolling amortization period (with re-amortization of the UAL in each valuation), the amortization amounts will never fully eliminate the UAL. Census data: We have used participant data as supplied by the plan sponsor. Funding policy: The postretirement medical plan s benefits are funded on a pay-as-you-go basis. The agencies fund on a cash basis as benefits are paid. No assets have been segregated and restricted to provide postretirement benefits. Mercer 16 NYSHFA, SONYMA and AHC December 14, 2010

Actuarial Basis (continued) Development of health care cost trend rates: The trend assumption selected for this valuation complies with Mercer s guidelines on retiree medical trend assumptions. The trend assumption is comprised of three: the initial trend rate, the ultimate trend rate, and the grade-down period. Trend rates exclude the expected impact of aging since this impact is explicitly reflected elsewhere in the valuation. As with any assumption, each trend rate assumption reflects a single scenario chosen from a wide range of possibilities. The Plan's actual experience will differ from these assumptions since the future is uncertain and nobody can predict with any measure of certainty how much health care costs will rise next year or in the future. The initial trend rate is the expected increase in health care costs into the second year of the valuation (i.e., the first assumed annual increase in starting per capita rates). Initial rates are established separately for pre-medicare medical claims, Medicare-eligible medical claims, prescription drug claims, and administrative expenses. For valuation purposes, these trend rates are blended together based on a costweighted average basis. The assumed ultimate trend rate and grade-down period are based on macroeconomic principles. These assumptions reflect assumed long term general information, nominal gross domestic product growth rates, and the excess of national health expenditures over other goods and services, and an adjustment for an assumed impact of population growth. Benefits not included in the liabilities: The valuation does not reflect any reimbursement of income related increases in Part B premiums that might be paid by retirees. Mercer 17 NYSHFA, SONYMA and AHC December 14, 2010

Actuarial Basis Summary of Actuarial Assumptions The following assumptions were used in valuing the liabilities and benefits under the plan. Mortality rates, withdrawal rates, and retirement rates are those for participants in the Employee Retirement System (ERS) in the report Development of Recommended Actuarial Assumptions for New York State/SUNY GASB 45 Valuation Participating Agency Version issued by Buck Consultants on May 21, 2009. Investment return 4.25% per annum for determining beginning-of-year UAAL and 2010 ARC 4.00% per annum for determining October 31, 2010 UAAL and estimated 2011 ARC Measurement date October 31, 2010. Salary Increases Not applicable. Health care cost trend rates Monthly per capita claims cost for calendar year 2010 The trend rates of incurred claims represent the expected rate of increase in employer claim payments: Calendar Year Part B Medical Pre 65 Medical Post 65 2010 6.86% 8.24% 8.80% 2011 6.72 7.99 8.50 2012 6.58 7.75 8.22 2013 6.45 7.51 7.94 2014 6.32 7.29 7.67 2015 6.19 7.06 7.40 2016 6.07 6.85 7.15 2017 5.95 6.63 6.90 2018 5.83 6.43 6.66 2019 5.71 6.23 6.43 2020 5.59 6.04 6.21 2021 5.48 5.85 5.99 2022 5.37 5.67 5.79 2023 5.26 5.50 5.59 2024 5.16 5.33 5.39 2025 5.05 5.16 5.20 2026 4.95 5.00 5.02 2027 4.85 4.85 4.85 2028 4.53 4.53 4.52 2029+ 4.50 4.50 4.50 Single $ 499.07 Family 1,165.06 Part B Premium 96.40 Mercer 18 NYSHFA, SONYMA and AHC December 14, 2010

Actuarial Basis Summary of Actuarial Assumptions (continued) Aging Claim cost development Subsidy under Medicare Modernization Act (MMA) Sick leave credits for employees retiring in 2009 and later Per capita retiree contributions Mortality No age adjustment is applied to the medical costs shown above. The claim costs for the valuation were developed based on 2010 premium rates. GASB guidance states that retiree drug subsidy payments should be accounted for as revenue rather than an offset to expense. Therefore, there is no reduction in total medical and prescription drug costs and liabilities under GASB 45 due to MMA. For employees retiring in 2010, sick leave credits are assumed to be 4% single / 15% family as a percentage of 2010 premium and to increase 5% per year prior to retirement for employees retiring after 2010. Contributions are estimated as stated under Per Capita Retiree Contributions in the Plan Provisions section. Retiree contributions are assumed to increase at the same rates as incurred claims. Mortality rates are those recommended by the actuary for the NYS/SUNY GASB 45 valuation. Age Male Female 20 0.0486% 0.0486% 30 0.0534 0.0534 40 0.0962 0.0962 50 0.2441 0.2177 60 0.7365 0.5332 70 1.8246 1.2686 80 4.6846 3.4091 90 14.5417 11.0872 Mercer 19 NYSHFA, SONYMA and AHC December 14, 2010

Actuarial Basis Summary of Actuarial Assumptions (continued) Withdrawal Withdrawal rates are those recommended by the actuary for the NYS/SUNY GASB 45 valuation. Years of Service Age Less than 2 years At least 2 but less than 3 At least 3 but less than 4 20 16.96% 10.87% 8.42% 30 15.07 12.07 9.06 40 11.94 8.04 6.23 50 11.16 6.94 5.23 60 11.21 7.60 6.48 Age At least 4 but less than 5 Years of Service At least 5 but less than 10 At least 10 20 7.52% 7.09% 3.25% 30 8.13 5.78 3.11 40 5.68 4.41 2.20 50 4.64 3.47 1.36 60 4.96 3.34 1.21 No withdrawal assumed after attainment of eligibility for retirement. Mercer 20 NYSHFA, SONYMA and AHC December 14, 2010

Actuarial Basis Summary of Actuarial Assumptions (continued) Retirement rates Marital status Percentage married at retirement Age difference of spouses Plan participation Vesting participation Retirement rates are those recommended by the actuary for the NYS/SUNY GASB 45 valuation for Tier 2 and above. Years of Service Age Less than 20 At least 20 but less than 30 At least 30 55 5.37% 8.83% 28.22% 56 4.52 7.17 20.94 57 4.63 7.31 18.39 58 4.87 8.15 21.28 59 5.68 9.62 24.37 60 6.41 11.77 23.71 61 11.52 20.84 32.99 62 20.91 39.19 43.71 63 14.09 25.83 31.10 64 14.54 23.37 24.98 65 19.90 31.10 27.76 66 15.51 24.23 22.96 67 14.73 21.72 21.74 68 14.15 21.25 20.47 69 15.79 21.04 21.86 70 100.00 100.00 100.00 Males... 50% Females... 50% Males are assumed to be 3 years older than their spouses. 100% of future retirees are assumed to elect medical coverage. 100% of retirees electing coverage who have spouses are assumed to elect spousal coverage. Employees who terminate employment are assumed to elect coverage upon reaching age 55 at the following rates (these rates are those recommended by the actuary for the NYS/SUNY GASB 45 valuation): Age at Termination Rate 40-43 5% 44 20 45-46 30 47-48 40 49 50 50-51 80 52+ 100 Mercer 21 NYSHFA, SONYMA and AHC December 14, 2010

Summary of Plan Provisions Medical Benefits Eligibility Benefit design Dependent coverage Benefit design Vesting Contributions Age 55 with 5 years of service Health insurance benefits through the New York State Health Insurance Plan. Reimbursement of Part B premium. Sick leave credits offset contributions and are frozen at retirement. Dental benefits on an access only basis. Benefits vest at 5 years of service subject to continuous participation in NYSHIP at full cost. Spouses receive the same benefit design as retirees, and benefits are continued for life for widows and widowers. Health insurance benefits through the New York State Health Insurance Plan. Former employees with five years of service may elect retiree medical benefits at age 55 provided they maintain continuous coverage prior to age 55 by maintaining enrollment on a NYSHIP plan and paying the full premium rate. Former employees with five years of service may elect retiree medical benefits at age 55 provided they maintain continuous coverage prior to age 55 by maintaining enrollment on a NYSHIP plan and paying the full premium rate. 10% single / 25% family Since leave credits at retirement are annuitized as a flat dollar offset to contributions. Mercer 22 NYSHFA, SONYMA and AHC December 14, 2010

Summary of Plan Provisions (continued) Survivor s Benefit (HFA only) Eligibility Age 62 or older with at least 10 years of service Retire from HFA Benefit amount $3,000 Dependent coverage Not applicable. Retiree contributions None Mercer 23 NYSHFA, SONYMA and AHC December 14, 2010

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