South Dakota Retirement System SDRS Budget Hearing February 18, - - PowerPoint PPT Presentation
South Dakota Retirement System SDRS Budget Hearing February 18, 2020 SDRS Overview SDRS provides retirement, disability, and survivor benefits for employees of the State of South Dakota and its political subdivisions Members of SDRS
February 18, 2020
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State of South Dakota and its political subdivisions
which include state, board of regent, public school, municipality, county, and
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To plan, implement, manage, and efficiently administer financially sustainable retirement income programs within the fixed resources available in accordance with fiduciary responsibilities and sound public policies
Provide members and their families the opportunity to achieve financial security at retirement, death, or disability by delivering appropriate and equitable lifetime benefits, and promote, encourage, and facilitate additional member savings for retirement
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SDRS:
– Variable benefits – Benefit improvement discipline – Statutory requirements for corrective actions
– Benefit policy – Funding policy – Governance and plan management
The SDRS Perspective provides a framework for disciplined System management
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contributions
6.0% 6.0% 6.5% 8.0% 8.7% 9.5% 10.6% 12.0% 12.9% 13.3% 13.6% 5% 10% 15%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Fiscal Year
Contribution Rates for General Employees
SDRS Median Large, Public Sector Employer
121.4% 76.5% 107.3% 96.9% 100.0% 93.0% 62.6% 77.6% 75.1% 100%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Fiscal Year
Fair Value Funded Ratio
SDRS Median Public Sector Plan SDRS' FVFR exceeds median by an average of 26%
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Data from NASRA Issue Brief: State and Local Government Spending on Public Employee Retirement Systems.
C:\work\NASRA\pension spending by state 2017.xlsx
South Dakota 1.98% Median = 3.98% 0% 2% 4% 6% 8% 10%
Percent by State
Government Contributions to Pensions as a Percent of All Direct Government Spending, FY 2017 Nationwide, state and local pension contributions total 4.7% of government spending
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which equals inflation for the prior year
unburdened by increasing retirement plan contribution requirements and balance sheet debt that impact many other states
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(0.5% to 3.5%)
– July 2020 COLA is inflation between 0.5% and 1.88% restricted maximum – CPI-W increased 1.56% for past year – July 2020 COLA will be 1.56%
the restricted maximum COLA
greater
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returns, are:
– 19% likelihood that a 0.5% COLA will be payable and additional Corrective Action recommendations will be required – 41% likelihood that the COLA will have a restricted maximum (CPI-W between 0.5% and the restricted maximum) – 40% likelihood that the COLA will be CPI-W between 0.5% and 3.5%, with a 5% likelihood of considering benefit improvements
0% 20% 40% 60% 80% 100% 120% FY 2020 Investment Return
19% 41% 35%
81%
5%
FY 2020 Net Investment Return Less than (7.1%) COLA=0.5% & Corrective Action Recommendations Required FY 2020 Net Investment Return (7.1%) to 10.1% Restricted Maximum COLA FY 2020 Net Investment Return Greater than 10.4% Full COLA: 0.5% to 3.5% FY 2020 Net Investment Return Greater than 32.1% Full COLA: 0.5% to 3.5% Benefit Improvements Considered
* Before consideration of liability gains/losses. Likelihoods based on SDIC 2019 benchmark asset allocation investment portfolio statistics (mean = 6.29%, standard deviation = 15.4%).
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– Active Members 41,500 (18% are Generational members) – Inactive Members 18,989 – Benefit Recipients 29,196 – Total 89,685
– Retirees’ average annual benefit is $21,301 and the average age is 72 – Class A members retiring in FY 2019:
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500 1,000 1,500 2,000
25 35 45 55 65 75 85
Members Age at June 30, 2007
2007
Retirees, Beneficiaries, Disabled Members Actives, Terminated Vested
Baby boomers are 44% of membership 11% of baby boomers are retired
500 1,000 1,500 2,000
25 35 45 55 65 75 85
Members Age at June 30, 2019
2019
Baby boomers are 38% of membership 56% of baby boomers are retired
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County: Municipal: Regents, Classified: Regents, Faculty/Adm.: State: School Classified: Teachers:
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Members Eligible for Unreduced Benefits in Next Five Years
Members eligible in next five years includes those currently eligible. Age and service shown are medians as for June 30, 2019 of those immediately eligible within five years of June 30, 2019. Class B median age shown separately where applicable.
Median Age Median Service 57.6 28.0 62.3 13.5 60.4/52.7 25.5/21.3 61.7 23.0 61.5 19.5 61.1/51.0 21.0/20.8 61.4/53.3 19.8/16.0 62.3 61.6 13.0 18.8
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Includes unreduced and reduced (early) retirements. Based on June 30, 2019 member data and actuarial assumptions, excluding pre- retirement exits.
0% 5% 10% 15% 20% 25% 1 Year 2 Years 3 Years 4 Years 5 Years
Percentage of Members Expected to Retire in Next Few Years
Teachers School Classified State Regents, Faculty/Adm. Regents, Classified Municipal County
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Excludes disabilities and terminated vested benefit commencements. Projected retirements are based on June 30, 2019 data, plan terms and actuarial assumptions. Active population size assumed constant (no growth).
200 400 600 800 1,000 1,200 1,400 1,600 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Retirement Counts by Fiscal Year
Retirements from Active Status Projected Retirements
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– Travel, phone, office, email – Comprehensive planning
– Early/mid-career, women and financial planning
– Pre-retirement (SDRS, Social Security, Supplemental Retirement Plan)
– Benefits Fairs, Public School In-service, etc.
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– Association of Governmental Accountants $330 – American Academy of Actuaries $350 – Association of Public Pension Fund Auditors $350 – Conference of Consulting Actuaries $425 – Government Finance Officers Association $990 – Institute of Internal Auditors $165 – National Association of Public Pension Attorneys $300 – National Pension Education Association $600 – Public Pension Financial Forum $400 – Society of Actuaries $650 – South Dakota State Bar $490 – Society of Human Resources $105
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systems:
– International Foundation for Retirement Education $1,960 – International Foundation of Employee Benefit Plans $1,300 – International Retirement Resource Center $2,457 – National Association of State Retirement Administrators $4,100 – National Conference of Public Employees Retirement Systems $2,050 – National Council on Teacher Retirement $5,030 – National Institute on Retirement Security $8,600
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(Page 5 of Budget Briefing)
– Encourage Board of Trustees conference attendance for training and education – Encourage SDRS staff conference attendance and industry involvement, facilitate continuing education on pension regulations, trends, and best practices and influence public pension industry, when possible – Adjust the budget line to reflect the current costs of travel: flights, hotels, etc.
– Includes death research subscriptions and licensing agreements – Adjustment required to better align budget with recent cost experience
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– Add conference room for Board of Trustees meetings and member seminars – Secure SDRS offices by isolating from the rest of the building
SDRS campus, including:
– Key card locks – Additional security cameras – Audio/visual equipment, furniture, and fixtures for the new conference room space
(Page 6 of Budget Briefing)
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– All benefited, all permanent
– Attorney position – Data Manager position – 0.5 FTE remains vacant as one position is currently filled at ½ time
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Long-term vision of SDRS:
– Strategic plan – SDRS perspective – Quantify and analyze risk, develop action plan – Monitor assumptions, benefit structure
– Staff and departmental