District Contribution and the Funded Ratio of the Plan October 4, - - PowerPoint PPT Presentation

District Contribution and the Funded Ratio of the Plan

Graham A. Schmidt, ASA, EA, FCA Anne D. Harper, FSA, EA, MAAA

AC Transit District Employees’ Retirement Plan

October 4, 2017

4 of 37

October 4, 2017

• Actuarial Valuation as
• f January 1, 2017
• Plan costs by benefit

and source

• History of Plan cost

and funding

• Future of Plan

liabilities, funding, and cost

• 10-year Projections

Agenda

2

1

5 of 37

October 4, 2017

Current Status: Plan Cost

3

2

Summary of Preliminary Plan Results January 1, 2016 January 1, 2017 % Change Participant Counts Active Participants 1,964 2,187 11.35% Participants Receiving a Benefit 2,010 2,030 1.00% Inactive Participants 230 206

• 10.43%

Total 4,204 4,423 5.21% Annual Pay of Active Members $ 135,001,919 $ 151,165,991 11.97% Projected Fiscal Year Actuarial Payroll $ 137,011,984 $ 153,416,725 11.97% Projected Fiscal Year Pensionable Payroll $ 170,000,000 Assets and Liabilities Actuarial Liability (AL) $ 874,284,100 $ 902,989,387 3.28% Actuarial Value of Assets (AVA1) 600,832,758 614,229,823 2.23% Unfunded Actuarial Liability (UAL) $ 273,451,342 $ 288,759,564 5.60% Funded Ratio (AVA1) 68.7% 68.0%

• 0.70%

Funded Ratio (MVA) 63.3% 65.9% 2.58% Inactive Funded Ratio 59.2% 57.7%

• 1.41%

Contributions Based on Actuarial Payroll FY 2016-2017 FY 2017-2018 Actuarially Determined Contribution2 $ 46,767,430 $ 51,689,045 10.52% Contribution Rate (as a Percentage of Payroll) 34.13% 33.69%

• 0.44%

Based on Projected Pensionable Payroll Actuarially Determined Contribution2 54,012,362 Contribution Rate (as a Percentage of Payroll) 31.77%

1 2016 AVA does not include the value of District contributions due for the remaining six months of the Fiscal Year. 2015 AVA includes

the value of District contributions due for the remaining six months of the Fiscal Year.

2 Assumes 20-year layers for UAL established after 1/1/2016, Offset amortization payment by UAL receivable only.

6 of 37

October 4, 2017

Current Status: Changes in Cost

4

3

Employer Contribution Reconciliation Total Cost as % Total Cost Payroll in Dollars FYE 2017 Net Employer Contribution 34.13% $ 46,767,430 Change due to demographic gains/losses and expected changes

• 0.40%

76,087 Change due to salary (gains)/losses during 2016

• 0.09%

(34,715) Change due to new entrants, amortization payroll

• 1.10%

3,113,698 Change due to investment gains/losses during 2016 0.00% 2,767 Change due to lengthier amort of receivable (based on 20-year amort) 0.64% 984,478 Change due to reduction in receivable (based on 20-year amort) 0.51% 779,300 Change due to differences in actuarial and projected payroll estimates

• 1.92%

2,323,317 FYE 2018 Net Employer Contribution 31.77% $ 54,012,362

7 of 37

October 4, 2017

Current Status: Cost Breakdown

5

4

Summary of Contributions for FY 2017-18 Cost as % of Item Fiscal Payroll Estimated Payroll Projected Pensionable Payroll $ 170,000,000 Amortization of Unfunded 17.21% $ 29,256,664 Expenses 0.55% 938,698 Normal Cost (Estimated) 14.01% 23,817,000 Total (Estimated) 31.77% $ 54,012,362 Cost in Dollars

8 of 37

October 4, 2017

Plan Normal Cost By Benefit

6

5

9 of 37

October 4, 2017

Plan Cost By Source

7

6

10 of 37

October 4, 2017

Plan Cost History

8

7

11 of 37

October 4, 2017

Plan Funding History

9

8

12 of 37

October 4, 2017

• History of Plan liabilities
• Changes in

Amortization Policy and Assumptions

• Projected future

contributions

• Projected future funded

ratios

Looking Ahead

10

9

13 of 37

October 4, 2017

History of Actuarial Liability ($)

11

10

14 of 37

October 4, 2017

Amortization Policy

• At August, 2016 meeting, Retirement Board voted to

adopt “closed, layered” amortization periods

– 2008 extraordinary loss: 23-year closed period, 37 years remaining as of 2017, $84 million outstanding balance – Remaining UAL as of 2016: 11 years remaining as of 2017, $205 million outstanding balance – Board elected to defer decision on amortization periods for future UAL changes until 2017

• Retirement Board deliberated amortization policies

at May and June, 2017 meetings

– Adopted 20-year amortization periods for future gains/losses and assumption changes – Shorter periods for any future plan changes, based on analysis by Board

11

15 of 37

October 4, 2017

Amortization Policy

1 3

12

Combination of three amortization “layer” payments comparable to 13-year single equivalent layer

Initial 1/1/2017 Remaining Date Initial Amortization Outstanding Amortization Amortization Type of Base Established Amount Years Balance Years Amount 2008 Extraordinary Actuarial Loss 1/1/2009 $ 78,762,712 30 $ 84,252,277 37 $ 5,666,879 Remaining UAL as of 2016 1/1/2016 212,567,221 12 204,478,197 11 22,568,906 2016 Experience Loss 1/1/2017 29,089 20 29,089 20 2,079 Total Unfunded Actuarial Liability (UAL) $ 288,759,563 $ 28,237,864 Offset to UAL for 1/1-6/30 Contribution Receivable (13,419,405) 20 (958,923) Net UAL Payment $ 27,278,941 With Interest to Fiscal Year 29,256,664 Development of Amortization Payment for Fiscal Year 2018 Table IV-2

16 of 37

October 4, 2017

Assumptions

• At July and August, 2017 meetings,

Retirement Board reviewed the economic assumptions

– Received information from investment consultant and actuary on expected returns, and input from District – Left discount rate at 7.25% for 2017, but voted to reduced rate to 7.125% for the 2018 valuation, and 7.00% for the 2019 valuation

13

17 of 37

October 4, 2017

Projections – Contributions

14

Projections based on 7.00% actual projected return for 2017+, regardless of discount rate used.

18 of 37

October 4, 2017

Projections – Funded Ratio

15

Projections based on 7.00% actual projected return for 2017+, regardless of discount rate used.

19 of 37

October 4, 2017

Projections

16

1 Based on projected pensionable payroll 2 Based on market value of assets

Year Discount Rate Contribution Rates1 Contribution Amounts1 Funded Ratios2 2017 7.25% 31.77% $54,012,000 65.86% 2018 7.125% 32.81% $57,448,000 66.55% 2019 7.00% 34.11% $61,527,000 67.58% 2020 7.00% 34.48% $64,057,000 69.66% 2021 7.00% 34.47% $65,956,000 71.93% 2022 7.00% 34.52% $68,022,000 74.29% 2023 7.00% 34.55% $70,128,000 76.73% 2024 7.00% 34.57% $72,287,000 79.26% 2025 7.00% 34.60% $74,512,000 81.88% 2026 7.00% 34.63% $76,806,000 84.63%

20 of 37

October 4, 2017

18

Required Disclosures

• The purpose of this presentation is to discuss the current status and outlook for

the Alameda - Contra Costa Transit District (AC Transit) Retirement Plan. This presentation is for the use of the Retirement Board in its education and outreach efforts.

• In preparing this presentation, we relied on information (some oral and some

written) supplied by Staff at AC Transit. This information includes, but is not limited to, the plan provisions, employee data, and financial information.

• To the best of our knowledge, this presentation and its contents have been

prepared in accordance with generally recognized and accepted actuarial principles and practices which are consistent with the Code of Professional Conduct and applicable Actuarial Standards of Practice set out by the Actuarial Standards Board. Furthermore, as credentialed actuaries, we meet the Qualification Standards of the American Academy of Actuaries to render the

• pinion contained in this presentation. This presentation does not address any

contractual or legal issues. We are not attorneys and our firm does not provide any legal services or advice.

• This presentation was prepared solely for the Retirement Board of AC Transit for

the purposes described herein. This presentation is not intended to benefit any third party and Cheiron assumes no duty or liability to any such party. Anne D. Harper, FSA, EA, MAAA Graham A. Schmidt, ASA, EA, FCA

17

21 of 37

October 4, 2017

1 9

Contacts Graham Schmidt

• gschmidt@cheiron.us, (703) 893-1456 x1137

Anne Harper

• aharper@cheiron.us, (703) 893-1456 x1107

Tim Doyle

• tdoyle@cheiron.us, (703) 893-1456 x1140

18

22 of 22