Preliminary Results of the June 30, 2014 Actuarial Valuation - - PowerPoint PPT Presentation

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Preliminary Results of the June 30, 2014 Actuarial Valuation - - PowerPoint PPT Presentation

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San Diego City Employees Retirement System Preliminary Results of the June 30, 2014 Actuarial Valuation January 9, 2015 Gene Kalwarski, FSA David Holland, FSA Topics for Discussion 1 Background Historical Trends June 30,

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SLIDE 1

Preliminary Results of the June 30, 2014 Actuarial Valuation

Gene Kalwarski, FSA David Holland, FSA

San Diego City Employees’ Retirement System

January 9, 2015

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SLIDE 2

January 9, 2015

Topics for Discussion

  • Background
  • Historical Trends
  • June 30, 3014 Valuation

– Summary of Key Results – Sources of Change

  • A Look Ahead

1

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SLIDE 3

January 9, 2015

Background

2

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SLIDE 4

January 9, 2015

The Valuation Process

3

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SLIDE 5

January 9, 2015

Timing

These June 30, 2014 valuation results are used to determine the FY 2016 Actuarially Determined Contribution (ADC) for all three plan sponsors The Board’s normal process is to consider the January valuation results as preliminary and then vote at the March meeting

4

January 9 , 2 0 1 5 presentation of valuation results July 1 , 2 0 1 5 associated ADC paid by plan sponsors Fiscal Year 2015 June 3 0 , 2 0 1 4 Valuation date Fiscal Year 2016

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SLIDE 6

January 9, 2015

Plan Effective Dates

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Tier I - Old Plans Closed under Prop B Tier II Tier V Prop B Tier III PEPRA Tier IV Tier II benefits / some PEPRA provisions apply 1 / 1 / 2 9 7 / 1 / 2 9 1 / 1 / 2 1 7 / 1 / 2 1 1 / 1 / 2 1 1 7 / 1 / 2 1 1 1 / 1 / 2 1 2 7 / 1 / 2 1 2 7 / 2 / 2 1 2 8 / 1 / 2 1 2 1 / 1 / 2 1 3 7 / 1 / 2 1 3 City General City Elected City Fire City Lifeguard City Police UPD General (Misc) UPD Safety Airport Authority

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SLIDE 7

January 9, 2015

Decisions Needed – The Discount Rate

  • At the September 2014 Board Meeting this

issue was discussed

– There was rationale presented for reducing the discount rate below the current assumption of 7.25% – Another reduction of 0.25% or less may be largely or fully offset by FY 2014 investment returns in excess of the assumed rate of return – Discount rate has been changed in two of the last three years

  • Valuation results will be shown at 7.25% and

7.0%

– We are comfortable at either of these discount rates, or anywhere in between

6

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SLIDE 8

January 9, 2015

Decisions Needed- Administrative Expenses

  • GASB no longer allows the discount rate for financial

reporting purposes to be net of administrative expenses

– In recent years, SDCERS’ administrative expenses have been paid via a series of Unfunded Actuarial Liability (UAL) layers amortized over 15 years. These layers have been relatively small compared to total investment and experience gains and losses

  • New ASOP #27 (eff. 6/30/2015 valuation) has strong

language suggesting explicit recognition of administrative expenses

  • Options:

– No change to current practice (may not comply with ASOP #27) – Reconsider with 6/30/2015 valuation – Add explicit assumption (our preferred approach)

  • Add full amount to the ADC
  • Phase in the impact over 3-5 years

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SLIDE 9

January 9, 2015

Historical Trends

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SLIDE 10

January 9, 2015

Assets and Liabilities - City

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The percentage shown at the top of each bar is the ratio of the Actuarial Value of Assets to the Actuarial Liability (the funded ratio).

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SLIDE 11

January 9, 2015

Contributions - City

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FY 2016 Actuarially Determined Contribution shown without administrative expense component.

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SLIDE 12

January 9, 2015

Gains and Losses - City

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G/(L) as % Investment Liability 1995 0.3%

  • 1.1%

1996 4.1%

  • 0.1%

1997 2.5%

  • 0.1%

1998 5.5%

  • 3.5%

1999 3.7%

  • 2.1%

2000 11.8%

  • 0.2%

2001

  • 3.8%
  • 3.5%

2002

  • 12.8%
  • 1.6%

2003

  • 12.1%
  • 0.5%

2004 1.3%

  • 2.3%

2005 2.8%

  • 1.0%

2006 4.0% 0.9% 2007 1.7%

  • 0.7%

2008

  • 1.7%

0.5% 2009

  • 19.4%
  • 0.1%

2010

  • 3.2%

1.1% 2011 1.9% 0.6% 2012

  • 1.2%
  • 0.6%

2013 0.5%

  • 0.5%

2014 2.6%

  • 0.4%
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SLIDE 13

January 9, 2015

Assets and Liabilities – Unified Port District

12

The percentage shown at the top of each bar is the ratio of the Actuarial Value of Assets to the Actuarial Liability (the funded ratio).

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SLIDE 14

January 9, 2015

Contributions – Unified Port District

13

FY 2016 Actuarially Determined Contribution shown without administrative expense component.

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SLIDE 15

January 9, 2015

Gains and Losses – Unified Port District

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G/(L) as % Investment Liability 1999 3.5%

  • 0.3%

2000 11.2% 0.1% 2001 0.9%

  • 3.4%

2002

  • 10.6%
  • 3.8%

2003

  • 6.6%
  • 1.4%

2004 0.5%

  • 1.6%

2005 1.9%

  • 1.8%

2006 10.3%

  • 0.4%

2007 2.1%

  • 0.8%

2008

  • 1.8%

0.9% 2009

  • 18.9%
  • 0.8%

2010

  • 3.1%
  • 0.5%

2011 1.3%

  • 1.1%

2012

  • 0.7%
  • 1.3%

2013 0.8% 0.7% 2014 2.9%

  • 1.0%
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SLIDE 16

January 9, 2015

Assets and Liabilities – Airport Authority

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The percentage shown at the top of each bar is the ratio of the Actuarial Value of Assets to the Actuarial Liability (the funded ratio).

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SLIDE 17

January 9, 2015

Contributions – Airport Authority

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FY 2016 Actuarially Determined Contribution shown without administrative expense component.

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SLIDE 18

January 9, 2015

Gains and Losses – Airport Authority

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G/(L) as % Investment Liability 2003

  • 5.8%
  • 8.4%

2004 3.5%

  • 11.7%

2005 4.8%

  • 7.9%

2006 14.3% 7.7% 2007 1.8% 0.6% 2008

  • 2.3%

3.2% 2009

  • 16.2%
  • 2.1%

2010

  • 2.6%

2.5% 2011 2.5% 3.2% 2012

  • 1.3%
  • 0.5%

2013 0.3%

  • 3.7%

2014 2.3%

  • 1.0%
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SLIDE 19

January 9, 2015

June 30, 2014 Actuarial Valuation Results

18

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SLIDE 20

January 9, 2015

Valuation Results – City

19 Valuation as of June 30, 2013 2014 2014 2014

Membership Actual Expected Actual @ 7.00% Actives 7,566 7,272 7,272 Payroll ($ in millions) 499.5 $ 480.5 $ 480.5 $ Average Salary $66,014 $66,080 $66,080 In Pay Status 8,454 8,822 8,822 Total Annual Benefits ($ in millions) 371.6 $ 398.6 $ 398.6 $ Average Benefit $43,959 $45,183 $45,183 Assets and Liabilities ($ in millions) Actuarial Liability 7,555.5 $ 7,820.5 $ 7,858.0 $ 8,067.2 $ Actuarial Value Assets 5,317.8 $ 5,661.2 $ 5,828.6 $ 5,828.6 $ Market Value Assets 5,395.2 $ 5,744.2 $ 6,292.9 $ 6,292.9 $ Unfunded Actuarial Liability (UAL) 2,237.7 $ 2,159.3 $ 2,029.4 $ 2,238.6 $ Actuarial Value Funding Ratio 70.4% 72.4% 74.2% 72.3% Market Value Funding Ratio 71.4% 73.5% 80.1% 78.0% Contributions (ADC in $millions) Without Admin. Expense Add On 263.6 $ 261.0 $ 250.6 $ 265.6 $ Expected Admin. Expense 12.5 $ 12.5 $ Expected Admin. Expense/3 4.2 $ 4.2 $ Expected Admin. Expense/5 2.5 $ 2.5 $ N/A N/A N/A

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SLIDE 21

January 9, 2015

Sources of Change – City

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Changes in UAL and ADC (dollars in millions) UAL ADC 1. Value at June 30, 2013 2,237.7 $ 263.6 $ 2. Expected Value at June 30, 2014* 2,136.8 261.0 3. Actual Value at June 30, 2014 (without admin expense component) 2,029.4 250.6 4. (Favorable)/Unfavorable experience (3 - 2) (107.5) $ (10.4) $ Breakdown of Experience (dollars in millions) UAL ADC 1. Actuarial investment experience different than projected (131.9) $ (13.9) $ 2. Liability experience 32.2 4.4 3. Contributions paid greater than expected (7.8) (0.7) 4. Other Misc (includes purchased service)

  • (0.2)

5. Total change: (sum 1 thru 4) (107.5) $ (10.4) $

* Includes projected phase-in of asset gains or losses

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SLIDE 22

January 9, 2015

Valuation Results – Unified Port District

21 Valuation as of June 30, 2013 2014 2014 2014

Membership Actual Expected Actual @ 7.00% Actives 417 385 385 Payroll ($ in millions) 34.5 $ 33.3 $ 33.3 $ Average Salary $82,802 $86,423 $86,423 In Pay Status 485 518 518 Total Annual Benefits ($ in millions) 18.7 $ 21.0 $ 21.0 $ Average Benefit $38,497 $40,605 $40,605 Assets and Liabilities ($ in millions) Actuarial Liability 410.0 $ 428.8 $ 433.2 $ 445.5 $ Actuarial Value Assets 302.3 $ 323.4 $ 333.2 $ 333.2 $ Market Value Assets 309.7 $ 331.3 $ 362.2 $ 362.2 $ Unfunded Actuarial Liability (UAL) 107.7 $ 105.4 $ 99.9 $ 112.3 $ Actuarial Value Funding Ratio 73.7% 75.4% 76.9% 74.8% Market Value Funding Ratio 75.5% 77.3% 83.6% 81.3% Contributions (ADC in $millions) Without Admin. Expense Add On 14.3 $ 14.4 $ 14.1 $ 15.1 $ Expected Admin. Expense 0.7 $ 0.7 $ Expected Admin. Expense/3 0.2 $ 0.2 $ Expected Admin. Expense/5 0.1 $ 0.1 $ N/A N/A N/A

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January 9, 2015

Sources of Change – Unified Port District

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Changes in UAL and ADC (dollars in millions) UAL ADC 1. Value at June 30, 2013 107.7 $ 14.3 $ 2. Expected Value at June 30, 2014* 103.1 14.4 3. Actual Value at June 30, 2014 (without admin expense component) 99.9 14.1 4. (Favorable)/Unfavorable experience (3 - 2) (3.2) $ (0.3) $ Breakdown of Experience (dollars in millions) UAL ADC 1. Actuarial investment experience different than projected (7.3) $ (0.7) $ 2. Liability experience 4.0 0.3 3. Other Misc (includes purchased service) 0.1

  • $

4. Total change: (sum 1 thru 3) (3.2) $ (0.3) $

* Includes projected phase-in of asset gains or losses

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SLIDE 24

January 9, 2015

Valuation Results – Airport Authority

23 Valuation as of June 30, 2013 2014 2014 2014

Membership Actual Expected Actual @ 7.00% Actives 347 362 362 Payroll ($ in thousands) 26,380 $ 27,955 $ 27,955 $ Average Salary $76,024 $77,225 $77,225 In Pay Status 51 67 67 Total Annual Benefits ($ in thousands) 2,014 $ 2,669 $ 2,669 $ Average Benefit $39,488 $39,833 $39,833 Assets and Liabilities ($ in thousands) Actuarial Liability 115,200 $ 125,779 $ 127,181 $ 131,362 $ Actuarial Value Assets 107,616 $ 117,789 $ 121,918 $ 121,918 $ Market Value Assets 108,456 $ 118,690 $ 130,228 $ 130,228 $ Unfunded Actuarial Liability (UAL) 7,584 $ 7,990 $ 5,263 $ 9,444 $ Actuarial Value Funding Ratio 93.4% 93.6% 95.9% 92.8% Market Value Funding Ratio 94.1% 94.4% 102.4% 99.1% Contributions (ADC in $thousands) Without Admin. Expense Add On 3,823 $ 3,874 $ 3,511 $ 4,111 $ Expected Admin. Expense 290 $ 290 $ Expected Admin. Expense/3 97 $ 97 $ Expected Admin. Expense/5 58 $ 58 $ N/A N/A N/A

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SLIDE 25

January 9, 2015

Sources of Change – Airport Authority

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Changes in UAL and ADC (dollars in thousands) UAL ADC 1. Value at June 30, 2013 7,584 $ 3,823 $ 2. Expected Value at June 30, 2014* 7,915 3,874 3. Actual Value at June 30, 2014 (without admin expense component) 5,263 3,511 4. (Favorable)/Unfavorable experience (3 - 2) (2,652) $ (363) $ Breakdown of Experience (dollars in thousands) UAL ADC 1. Actuarial investment experience different than projected (2,770) $ (254) $ 2. Liability experience 1,329 (49) 3. Employee contributions paid greater than expected (383) (35) 4. Employer contribution to target 95% funding (828) (76) 5. Increase in negative amortization cost component N/A 57 6. Other Misc (includes purchased service)

  • (6)

7. Total change: (sum 1 thru 6) (2,652) $ (363) $

* Includes projected phase-in of asset gains or losses

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SLIDE 26

January 9, 2015

A Look Ahead

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SLIDE 27

January 9, 2015

Required Disclosures

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The purpose of this presentation is to present preliminary actuarial valuation results for the San Diego City Employees’ Retirement System. This presentation is for the use of the Board of Administration and its auditors. In preparing our presentation, we relied on information, some oral and some written, supplied by the San Diego City Employees’ Retirement System. This information includes, but is not limited to, the plan provisions, employee data, and financial information. We performed an informal examination of the obvious characteristics of the data for reasonableness and consistency in accordance with Actuarial Standard of Practice No. 23. We hereby certify that, 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 that 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 opinion contained in this presentation. This presentation does not address any contractual or legal issues. We are not attorneys, and

  • ur firm does not provide any legal services or advice.

This presentation was prepared exclusively for the San Diego City Employees’ Retirement System for the purpose described

  • herein. This presentation is not intended to benefit any third party, and Cheiron assumes no duty or liability to any such

party. The actuarial assumptions, data and methods are those that will be used in the preparation of the actuarial valuation report as of June 30, 2014. The assumptions reflect our understanding of the likely future experience of the Plan, and the assumptions as a whole represent our best estimate for the future experience of the Plan. The results of this presentation are dependent upon future experience conforming to these assumptions. To the extent that future experience deviates from the actuarial assumptions, the true cost of the Plan could vary from our results. Gene Kalwarski, FSA David Holland, FSA