SDRS S MMARY AND FACT SHEET During fiscal year 20 15 , the South - - PDF document

SLIDE 1

South Dakota R: etirement System Presentation to the JointAppropr·ations Comm·ttee

February 5, 2015

Public e s·ons 01: The Mathematics to Sustain a Pension Plan

Contributions + Investments - Benefits + Expense-S

For a pension plan to be sustain.able over the long-term, this equation must be achieved.

• Contributions by members and their employers based on statutory or actuarial rates
• Investment earnings, net of

fees, on the trust fund of the public pension plan

• Benefits payable to the members of

the plan - ,vb.en calculated tbe funded ratio is the assets compared to the present value of the accrued benefits payable m. the future. to all members

• fthe plan (in today' s dollars ·
• Expenses for the operations of

the pension plan and trust fund

SLIDE 2

SDRS S MMARY AND FACT SHEET

• During fiscal year 2015, the South Dakota Retirement System (SDRS) celebrated the 40th

year of

• peration as a consolidated retirement system for the public employees of South

Dakota.

• The SDRS Trust Fund has grown substantially from £50 million in 1974 to over $10 billion

in 2014. Annual benefits paid in 1974 totaled S3 million; by 2014, that amount soared to over S425 million . .

• Membership has also experienced considerable gro\~ from 23,500 members, including

2,900 benefit recipients, in 1974 to over 79,000 total members in 2014, of which over 24,000 are receiving benefits.

• Even ,vhi.le SDRS has matured into a robust system, its roots are still embedded i.t1

conservative fiscal operations, prndent benefit designs, and long-term sustainability. SDRS remains among the best funded public pension plans natiomvide, ,;i,,hich is impressive considering that the SDRS Board of Trustees investment return a:nd mortality assumptions are among the most con.servati,·e used by .statewide plans.

• SDRS continues to be fully funded on both a fair value basis and an actuarial T

' alue basis at

107.3 percent and 100.0 percent, respectively. This exceptional achievement was realiz- ed as a result of the conservative oversight of the Board of Trustee-s, the long-term success of the South Dakota Investment Council, a:nd through the on-going support of the Executive and Legislative branches of state government and the SDRS membership. SDRS is well- positioned to confront challenges in the future.

• During fiscal year 2014, the Cement Plant Retirement Fund was merged into SDRS. Because
• f appropriations made by this committee to fully fund the Cement Plant Retirement Fund,

the merger had no adverse impact on the funded status of SDRS or benefits for former Cement Plant employees.

• SDRS continues to focus on sei-vices provided to members, particularly in the areas of

education and communication. In 2014, SDRS implemented an early and mid-career workshop that focuses on financial and retirement planning; the SDRS pre-retirement workshop \vas. expanded to provide members ,'Vi.th a more holistic. approach to retirement planning.

• A retiree forum was i.t1troduced this year to extend additional support to members after
• retirement. In the upcomi.tig year, SDRS v,rill continue to emphasize the importance of

additional personal retirement sa ·ings through a communication initiative to SDRS members.

• As SDRS moves fonvard, the financial integrity of

the system and the seiv ic.es provided to

• ur members will continue to be the main priorities of

the SDRS Board of Trustees and staff

SLIDE 3

SDRS ORGANIZATIO AL CHART

Invest ent Council Consu ing Actuary Private Sector Administrator Ope ations Aud ii:/ Comp!iance

Se ¥ices

Administration

Exe tive Sentices ember Sen1ices

EXECUTIVE D RECTOR." Robert A. Wy lie ADMINIS RA OR E"XECU IVE .-\.SSISTii,__ " T Dawn M. Smith, CRC19 Manag: ement , Group

OPERAT O ·s/COI\·lPLLA.. CE • usan Jahraus, PA,

R

DIRECTO R

GE:-JER.Al COl. SEL Jacque I, n Storm, JD CHIBF FI iA iC OFFICER Jane Roberts. CRC

I\· EI\· BER SER\1 CES/ Travis W. lmond, CRC'lll COiVi\,tU "IC.A.TIO. ·s _ !A1':AGER SE:-JIOR ACTUARY Dougla

. iddler,

ASA, EA, MAAA AD?vL . ST R..a\ TIVE SERYICES Li

.sa A. Vandcr Malen ~v!P. "AGER

Financial Services Legal & Leg·•lati~e Services Info mai:ion Services Retireme t Laws Committee Legislature Act aria l Service-s. Ad in istra: · e

Service-:.

Advisors, Auditors, and Administrators

• CO. SULT_ ·c Buck Consultants, Inc.

ACTUARY Denvel' CO EXT ER AL Eide Bailly LLP

A DITOR Boise, ID

P V,.J.. TE S ECTOR Nationwide Retirement Solutions

AD~'l . - STRA TOR Col urn bus, OH

RETIREI\1ENT R. Paul chrader CON SULTANT De11ver, CO

FOR.1\i i\ TI01': SERV CESt Scott Sduoeder (Bin COI\·_PU. ER S UPPO RT Pierre. D

• S. Lee Huset (BIT)

Pierre,. D Done l.le Beynon (BIT)

Pierre, SD

SLIDE 4

PERFORi"\fANCE MEASUREMENT

The international benchmarking firm, CEM, annually measures and compares the costs and quality of ser, ices provided by public employee retirement systems. The graphics below, from CEM's report issued in January 2014, show the comparison of costs and service for SDRS and a peer universe of statewide retirement systems with less than 100,000 members. Based on the CEM information, SDRS administrative costs are the lowest in the peer group while providing above average se.1vice t.o the membership.

Pension Adrninistratioo Co~ Per Ac-tive

MemberandAnnul nt

• Y
• :.1 -

.Pc-e:r -

tiee!'"A ..

• :; - --- 'Peer

iii

In measuring _ E productivity SDRS' ,veighted transactions per front--

• ffice

FTE ,,vere 95% above the adjusted peer

• average. Higher transaction volumes per

FTE decreased DRS' total cost p r

• member. Front-office FTE work includes

100 90 80 70

, 60

50 10

D 100,000 U0.000

activities in,olving contact with members

100,000

• r employers, such as paying pensions,

member calls, and presentations.

!IJ,

• 60.000

20.000

Total ~rvke Sc:ore

• You
• - - - 1

Pe&Wt

~-::

SLIDE 5

SDRS CO Tl GENCY PLA I G STRATEGIES

• The Board s policies and strategies ,vi.ll continue to focus on the best long-term funding

practices and limit reactions to short-term conditions or temporary accounting results

• While maintaining a 100% funded status is a Board objective, it is very unlikely it vvill be

maintained in all economic conditions and attempting to do so may be inconsistent v,,ith long- term planning

• The funded status of

the System should continue to be measured on the basis of realistic and conservative actuarial assumptions, but the Board should be cautious in making periodic changes to assumptions.

• Future investment 1

·etum assumptions ,..,ill focus on the SDIC outlook and past experience, and consider the SDRS Risk Management Contribution and Cushion

• The 2010 Corrective Action strategy will continue to be follo\>,'ed resulting in:
• Recommende,d Corrective Actions by the Board if

the Fair\ alue Funded Ratio (FVFR) drops below 80% at any actuarial valuation date

• Corrective Actions recommendations \-vill be sufficient to:
• Increase the FVFR to 80% or more
• Meet the actuarial funding requirements
• Meet conditions (1) and (2) of

Section 3-12-122

• Recommended Corrective Actions will also consider the SDIC outlook for recovery and the

likelihood of the adequacy of future investment returns eliminating the Deficit in a reasonable time period

• The 120% FVFR minimum threshold for considering benefit improvements should be

evaluated, probably raised, and the cost of the maximum SDRS COLA should be included in the calculation of tl1e Fv'FR con:1pared to the threshold for recommending benefit improvements

• The altemafr·e methodology for making benefit improvements is a preferred strategy
• While the ne\-v GASB requirements may result in SDRS c1·eating a Net Pension Liability

and/or a net balance she.et liability on the financial statements of SDRS participating employers during poor economic times, SDRS will be managed to minimize that impact through its funding policies and plan design features

• Objectives for a review of

the SDRS benefit structure include:

• Preservation of

earned benefits

• Reduction or elimination of

subsidies

• Consideration of

all benefit practices and features.

• Additional or expanded variable benefit features and limited add.it.ions to fiX:ed
• bligations.
• A rebalance of

the benefits provided, not a reduction in the total benefits

SLIDE 6

National Council on Teacher Quality Doing the Math on Teacher Pensions: How to Protect eachers and Taxpayers

January 2015

Figure 4. State teacher pension gr des (2014)

Pension Jradt

._NJ:;ka

A South Dako.a B• Flori&

B- MIO'll!all B-

Oiio

B-

Rhode lsl:.nd

B- 'Htlslwl

Oil

Disnict of Colulmia ()na.aon

8-

B- Sou1b Caroina C+

• n

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California Delav,are Idaho HlillOIS llldlilll<! Mai

Mi-ora

Vir ini~

Na~ =------

Colorado Louisiana --~- adii

.ffarrllshire

.PlbnSil, 'Conn

· ut Georpa

Kamas ----

Ma

r)b,d

Massac:~setts New Yorll

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NATI AVERAC

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f

C-

1gure 6.

Unfunded pension l1ab1II es by state (2014).

ama ~~~~§ AJ~ska

/lnzooJ

Arl<ansas ,Californ·

Colorado Com!c cut

Delaware

Oistrr o C

• llmbta

Flonda Georeia ~g-~ Haw I 1daho~--~ IJnfu ded l1abi Jty

,ll.65. 59;317

S3.20 . 783,000 54,214 430,000 $4,471 ,000,000 "$73,667 000,000 514,067,932.000

Sl 1,127 397,000 S191 7 9.870 Sl73,268,000

S6,5 3,404,630 S12,086'.346,000 S935.966,9S9 S397 496,000 SSS,731.797,000 SI l ,522.81S.41

3,647,587,716

• --.iiiiiiiiiiiiiiiiia.:56,

,780,000,000

l<entucky

SIJ,854.47 ,000

Lousiar.a

Sll,348,552,354

Maine

Sl,352.979,130

Maryland S6.608.7l4,802

fassachuse 517,347,748.000

l1thia n

S24,266 000,000 linne5obl S6,6d4,003.000

l1ssis51W1

5,870.394,270

l1sso11n

S7,315,018,539 Mo,i

Sl 52.t 780.000

Nebraska 2.281.814,491

ew 1-larn&)stur

~

.New Jersey New Meloco Ohio Oregon Pemsjlv raa

Rhode I

swid Carolm South D ota n ssee

Taxas

$4,0I S 520,647

S997,382.578 21.89 . 797.751

$6,533,731,488

• sn. 1.

.ooo

S2.l 19 513,903 Sl, 34,817,443 531,775,908.000 S8J lU@,202

• 1. 092,00'.>

,000 $32,598.554-,000 Sl.439.612.019 $8;489,344,990

h

,===~~

50 S282.376.550 S28,936,27S,228

S3 7938.200

Sl.013,910.285

\'/rsconsin

Oll1ll1g

NATIONAL Sll.881.714.000 S954.00'.>,000

'179.2 ,000 526,486,000

S768,9~009 $499.150.263.787

F,r • i W •

'"

t

• Y

..

,~.o, •• i..

, ,

"1'"" _

,..,...,..l

Pettent of systam funded 66.5

9.~

154 73.3 66.~ 60.3% 55.29. 9l.L% 90.1 88.5

823'

59.~ 93.9K 40.6%

45.79(

80 51.~ 56.4 776%

671

55]% 61. 7l.6K 57]

BO 1%

66'.~ 771%

60.l

87 5%

94.2% .&

66.3%

57.2%

95. 63. 58.1% 7 100.(11!.

96,0%

80.8% 77 605%

_____

71 21{

94. ST. 99.9K 7 8.G

SLIDE 7

National Council on Teacher Qual'ty Doing the Math on Teacher Pensions: How to Protect Teachers and Taxpayers

January 1015 1gure 8.

Accrued pension deb per K

• 12 public schools udent by state. 20 4

S30,000

~ ...

] S25,000

"'

• '

< ~

S20,000 a,

:::;

:0

,::.

• S15,000

] Sl0,000

b

u

Average $10.

,4 2

. t L_