Will COVID-19 Trigger Teacher Retirements? Webinar August 14, 2020 - - PowerPoint PPT Presentation

Will COVID-19 Trigger Teacher Retirements?

Webinar

August 14, 2020

Agenda

• 01. Introductions
• 02. Research Review
• 03. Q&A

National Institute on Retirement Security 1

Speakers

Dan Doonan

National Institute on Retirement Security 2

NIRS Executive Director

David Lamoureux

CalSTRS Deputy System Actuary

Speakers

Paul Angelo

National Institute on Retirement Security 3

Segal Senior Vice President and Actuary

Rocky Joyner

Segal Senior Vice President and Actuary

National Institute on Retirement Security 4

615,842 592,890 544,014 430,757 382,036 346,115 337,707 330,759 328,163

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-18

Number of Students Enrolled in Traditional Education Programs

Source: US Dept of Education, Title II: https://title2.ed.gov/Public/Home.aspx

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• 37%
• 80%
• 60%
• 40%
• 20%

0% 20% 40% 60% NATIONAL AVG NEW MEXICO PENNSYLVANIA MICHIGAN IDAHO NEW JERSEY ILLINOIS DELAWARE CONNECTICUT OHIO ALASKA MARYLAND INDIANA ALABAMA OKLAHOMA WEST VIRGINIA TENNESSEE MONTANA OREGON NEW YORK IOWA SOUTH DAKOTA RHODE ISLAND NEBRASKA SOUTH CAROLINA KENTUCKY VIRGINIA MAINE MISSOURI ARKANSAS COLORADO NORTH DAKOTA VERMONT MISSISSIPPI NEW HAMPSHIRE WISCONSIN MINNESOTA UTAH CALIFORNIA WYOMING KANSAS LOUISIANA MASSACHUSETTS HAWAII ARIZONA NEVADA FLORIDA GEORGIA NORTH CAROLINA TEXAS DISTRICT OF COLUMBIA WASHINGTON

Change in Teacher Pipeline 2009-10 through 2017-18

Source: US Dept of Education, Title II: https://title2.ed.gov/Public/Home.aspx

National Institute on Retirement Security 6

Source: US Dept of Education, Title II: https://title2.ed.gov/Public/Home.aspx

• 47%
• 100%
• 80%
• 60%
• 40%
• 20%

0% 20% 40% 60% NATIONAL AVG NEW MEXICO IDAHO MICHIGAN PENNSYLVANIA DELAWARE NEW JERSEY INDIANA ILLINOIS CONNECTICUT MARYLAND ALASKA WEST VIRGINIA NORTH CAROLINA OHIO OKLAHOMA NEW YORK SOUTH CAROLINA KENTUCKY OREGON TENNESSEE IOWA ARKANSAS RHODE ISLAND MONTANA DISTRICT OF COLUMBIA MISSISSIPPI SOUTH DAKOTA NEBRASKA VIRGINIA VERMONT ALABAMA COLORADO TEXAS MISSOURI NORTH DAKOTA MAINE MINNESOTA CALIFORNIA WISCONSIN UTAH KANSAS FLORIDA WYOMING LOUISIANA NEW HAMPSHIRE MASSACHUSETTS ARIZONA NEVADA GEORGIA HAWAII WASHINGTON

Change in Enrollment: Traditional Programs 2009-10 through 2017-18

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Sources: Chronicle of Higher Education: https://www.chronicle.com/interactives/freshmen-survey and UCLA/CIRP: https://heri.ucla.edu/publications-tfs/

4.2% 9.56%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 1 9 7 1 1 9 7 2 1 9 7 3 1 9 7 4 1 9 7 5 1 9 7 6 1 9 7 7 1 9 7 8 1 9 7 9 1 9 8 1 9 8 1 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 2 1 1 2 1 2 2 1 3 2 1 4 2 1 5 2 1 6 2 1 7 2 1 8 2 1 9

2016 UCLA/CIRP American Freshman Survey: Percent of Freshmen Pursuing Education Majors

% Intending to Major in Education Pre-Recession Avg.

A large majority of teachers will serve

• ut long careers
• Teachers in the 6 states will typically serve 25 or

more years and leave service at age 58 or later.

• Nearly 7 out of 10 will serve until at least early

retirement age under current pension rules.

• Many defer retirement past the first eligibility for

retirement benefits

• Clearly the benefit designs for most teacher plans

encourage this behavior

• The next slides provide context

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FY 2017 Teacher Service Distribution

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Typical teacher will serve 25 years and leave at age 58

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65% of Teachers Will Serve 20+ Years

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68% of Teachers Will Serve Until Retirement Eligibility

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But what if COVID-19 disrupts pattern?

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This could lead to greater retirements than predicted with possible consequences

• Increased benefit payouts, potentially creating cash flow issues
• Increase in required contributions for pension plans
• Teacher shortages
• Where will replacement teachers be found?
• What is a Pension Board or School District to do?
• Will COVID be considered a “line of duty” disability (NYC schools has

enacted this)

• Or (as has started in some states), will laws be adopted that limit liability for

employers and others from claims relating to COVID-19 exposure?

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What are implications if retirements spike?

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Retirement Eligibility Rules OPEB Liability Payroll

Modeling Risk

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CalSTRS Review of Funding Levels and Risks

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Investment Risk

Potential for lower returns and increased market volatility

Longevity Risk

Members living longer in retirement

Membership and Payroll Growth Risk

Affects incoming contributions if membership base declines

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10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Age Less than 25 Age 25 to 30 Age 30 to 35 Age 35 to 40 Age 40 to 45 Age 45 to 50 Age 50 to 55 Age 55 to 60 Age 60 to 65 Age 65 to 70 Age 70 and over

Distribution of CalSTRS Active Members by Age Group

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375,000 400,000 425,000 450,000 475,000 2 4 2 5 2 6 2 7 2 8 2 9 2 1 2 1 1 2 1 2 2 1 3 2 1 4 2 1 5 2 1 6 2 1 7 2 1 8 2 1 9

Number of Active Members

Number of Active Members for the Last 15 Years

(Defined Benefit Program Only)

Impact of Membership Fluctuations on Funded Status

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60% 62% 64% 66% 68% 70% 72% 74% 76% 78% 80% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Actual Population Stable Population

Modeling the Impact of a Recession and Recovery

• Scenario #1 – “Dot Com Bubble”

–2000 to 2008 period

• Scenario #2 – “Financial Crisis

–2008 to 2018 period

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0% 20% 40% 60% 80% 100% 120% 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046

Projected Funded Status

0% 5% 10% 15% 20% 25%

FY 19-20 FY 21-22 FY 23-24 FY 25-26 FY 27-28 FY 29-30 FY 31-32 FY 33-34 FY 35-36 FY 37-38 FY 39-40 FY 41-42 FY 43-44 FY 45-46

Projected Contribution Rates

Employer State

Projected Funded Status and Contributions Rates

Base Scenario 7% return each year 3.50% annual payroll growth Funded Status in 2046: 99.9%

Unfunded Actuarial Obligation Eliminated by 2046

Employers’ Share YES State’s Share YES Unallocated NO

22

0% 20% 40% 60% 80% 100% 120% 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046

Projected Funded Status

0% 5% 10% 15% 20% 25%

FY 19-20 FY 21-22 FY 23-24 FY 25-26 FY 27-28 FY 29-30 FY 31-32 FY 33-34 FY 35-36 FY 37-38 FY 39-40 FY 41-42 FY 43-44 FY 45-46

Projected Contribution Rates

Employer State

Projected Funded Status and Contributions Rates

Recession and Recovery Scenario #1 Dot Com Bubble Funded Status in 2046: 98.8%

Unfunded Actuarial Obligation Eliminated by 2046

Employers’ Share YES State’s Share YES Unallocated NO

23

0% 20% 40% 60% 80% 100% 120% 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046

Projected Funded Status

0% 5% 10% 15% 20% 25%

FY 19-20 FY 21-22 FY 23-24 FY 25-26 FY 27-28 FY 29-30 FY 31-32 FY 33-34 FY 35-36 FY 37-38 FY 39-40 FY 41-42 FY 43-44 FY 45-46

Projected Contribution Rates

Employer State

Projected Funded Status and Contributions Rates

Recession and Recovery Scenario #2 Financial Crisis Funded Status in 2046: 71.0%

Unfunded Actuarial Obligation Eliminated by 2046

Employers’ Share YES State’s Share NO Unallocated NO

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Questions

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