Yuba City Actuarial Information Todd Tauzer, ASA, MAAA January 28, - - PDF document

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Yuba City Actuarial Information Todd Tauzer, ASA, MAAA January 28, - - PDF document

Sep 20, 2022 135 likes •278 views

1/27/2014 Yuba City Actuarial Information Todd Tauzer, ASA, MAAA January 28, 2014 1 Overview Actuarial concept review New smoothing and amortization policy Yuba Citys pension profile Issues impacting future rates 2

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Yuba City

Actuarial Information Todd Tauzer, ASA, MAAA January 28, 2014

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Overview

  • Actuarial concept review
  • New smoothing and amortization policy
  • Yuba City’s pension profile
  • Issues impacting future rates
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Key Actuarial Concepts

  • Present Value of Benefits
  • Accrued Liability
  • Plan Assets
  • Normal Cost

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Present Value of Benefits (PVB)

  • Example:

– Say an employee is half way through a career of 30 years – PVB is the amount of money needed to fully fund both the 15 years of service accrued to date and the expected 15 future years of service

Total dollars needed on valuation date to fully fund all expected benefits for current members in the plan (both past and future service)

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Accrued Liability (AL)

  • From our previous example:

– AL is the present value of the benefit the employee has earned for the 15 years of service already worked

The value of benefits earned on the valuation date by members currently in the plan (past service only)

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  • Therefore whatever difference there is between the plan assets

and the AL results in the Unfunded Accrued Liability (UAL) or Surplus

  • The ratio of the AL and plan assets is the Funded Status

Assets

The amount of money invested as of the valuation date which supports the plan liabilities.

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  • Dependent on plan provisions and assumptions including

expected investment return, average age members entered plan, and salary growth

Normal Cost (NC)

Annual cost associated with one year of service accrual

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Putting it all together:

Assets Unfunded Liability Future NC Contributions Present Value

  • f Benefits

Accrued Liability Future NC Contributions Assets Unfunded Liability Future Contributions CY Normal Cost CY Amortization

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  • Background
  • Changes
  • Impact

New Amortization and Smoothing Policy

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  • In the past, assets were measured by market value and actuarial

value – Market Value of Assets (MVA) measured the true dollar amount of actual investments – Actuarial Value of Assets (AVA) was used in the valuation to smooth rates, protecting from volatility in investment returns

Background: Assets

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  • Previous valuations used the following smoothing

techniques:

– Investment returns: 15 years – Experience gains and losses: rolling 30 years

Background: Amortization

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  • Starting in the June 30, 2013 valuation setting employer

rates for 2015-2016:

– There will no longer be AVA, only MVA – Instead of 15 year investment smoothing between AVA and MVA, there will be 5 year direct rate smoothing – Experience gains and losses will be amortized on a fixed or declining 30 year period instead of rolling

  • The impact of these changes will be phased in over 5 years

Changes

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  • Results in higher employer contributions in the short term,

but lower contributions ultimately as the UAL gets completely paid off

  • Agencies now make significant progress towards being fully

funded

  • Eliminates confusion between two sets of asset values

Impact

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Impact: Yuba City Miscellaneous Employer Rates

0.000% 5.000% 10.000% 15.000% 20.000% 25.000% 30.000% 35.000%

1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019 1/1/2020 1/1/2021 1/1/2022 1/1/2023 1/1/2024 1/1/2025 1/1/2026 1/1/2027 1/1/2028 1/1/2029 1/1/2030 1/1/2031 1/1/2032 1/1/2033 1/1/2034 1/1/2035 1/1/2036 1/1/2037 1/1/2038 1/1/2039 1/1/2040 1/1/2041 1/1/2042 1/1/2043

Current Method New Method

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Impact: Yuba City Miscellaneous Unfunded Liability

$0 $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000

1/1/2008 1/1/2009 1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019 1/1/2020 1/1/2021 1/1/2022 1/1/2023 1/1/2024 1/1/2025 1/1/2026 1/1/2027 1/1/2028 1/1/2029 1/1/2030 1/1/2031 1/1/2032 1/1/2033 1/1/2034 1/1/2035 1/1/2036 1/1/2037 1/1/2038 1/1/2039 1/1/2040 1/1/2041 1/1/2042 1/1/2043

Current UAL New UAL

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  • Contribution Rates
  • Funded Status

Yuba City: CalPERS profile

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*Projected

Yuba City Employer Contribution Rates

Miscellaneous Safety T1 Safety T2 2013-2014 23.595% 30.068% 29.087% 2014-2015 24.815% 31.721% 30.753% 2015-2016* 26.3% 33.8% 32.8% 2016-2017* 27.8% 35.9% 34.9% 2017-2018* 29.3% 38.0% 37.0% 2018-2019* 30.8% 40.0% 39.0% 2019-2020* 32.4% 42.1% 41.1%

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Public Agency Employer Rate Comparison

*Includes all public agency benefit formulas in this category Miscellaneous Safety Yuba City Average* Yuba City T1 Yuba City T2 Average* 2013-2014 23.6% 15.3% 30.1% 29.1% 32.0% 2014-2015 24.8% 15.6% 31.7% 30.8% 31.8%

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Public Agency Funded Status Comparison

*Includes all public agency benefit formulas in this category Miscellaneous Safety Yuba City Average* Yuba City T1 Yuba City T2 Average* 2013-2014 71.4% 74.8% 78.9% 78.9% 73.1% 2014-2015 67.3% 71.1% 73.7% 73.7% 70.0%

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  • Experience Study Results
  • New Proposed Pension Reform Bill
  • Pooling changes

Items that could impact rates

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  • Going before the Board for approval in February
  • Biggest impact is from higher projected life expectancy:

– male longevity increased by 2.1 years – female longevity increased by 1.6 years

  • Largest salary growth seen in County Peace Officers
  • Impact to rates will be phased in over five years
  • No anticipated change in discount rate

Experience Study

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Anticipated Rate Changes from Proposed Assumptions

Normal Cost Increase Total Rate Change (Year 1) Total Rate Change (Year 5) Safety Fire 0.0% to 0.5% 1.2% to 1.9% 6.3% to 7.2% Safety Police 1.1% to 1.7% 1.9% to 3.3% 5.3% to 9.3% Misc 2% at 55 0.2% to 0.3% 0.4% to 1.3% 1.3% to 5.1% Misc 2.7% at 55 0.4% to 0.7% 0.9% to 1.9% 3.1% to 6.5%

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  • Proposed by the mayor of San Jose
  • Would allow employers to negotiate and change future

pension and health benefit accruals for current employees

  • Will be voted on in November 2014

Pension Reform Bill

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  • Resulting from PEPRA implementation, current pooled

plans will have declining payroll

  • But the UAL of each plan and pool is a dollar amount

– The result of spreading a dollar amount over less payroll would be accelerated growth of contribution rates

  • For example:

Upcoming pooling changes

Expected Payroll Growth Declining Payroll Payment Payroll Rate Payment Payroll Rate $ 200,000 1,000,000 20% $ 200,000 1,000,000 20% $ 206,000 1,030,000 20% $ 206,000 900,000 23%

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  • Therefore, in the 2013 valuation to set 2015-2016 rates, the

plan is to join all pooled miscellaneous plans into a single pool and all pooled safety plans into a single pool

– Surcharges will be applied based on benefit formulas and

  • ptional benefits
  • Additionally, we are looking at allocating each pool’s UAL on

a plan specific basis

  • All pooling changes are pending board approval (March or

April)

Upcoming pooling changes

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Questions?