Michigan State Police Retirement System Pension Actuarial Valuation Results
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Michigan State Police Retirement System Pension Actuarial Valuation Results
Michigan State Police Retirement System Pension Actuarial Valuation Results as of September 30, 2012 Copyright © 2013 GRS – All rights reserved. Actuarial Valuation Process Member Data Financial Data Actuarial Valuation Actuarial Assumptions Plan Provisions % Actuarial Cost Method 1 Membership Data 133 Number of Members 5,000 142 185 2,762 2,857 2,913 4,000 3,000 2,000 35 1,000 1,556 55 46 1,451 1,426 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Valuation Year Actives 2 Inactives Retirees & Beneficiaries DROP Members Ratio of Active Members to Pension Benefit Recipients 1 .56 .51 .49 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Valuation Year 3 Benefits as % 's of Pay Pension Benefits Expressed as %’s of Active Member Pay 89.0% 100% 80% 60% 40% 20% 0% 77.8% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Valuation Year 4 97.5% Average Annual Pensions As of September 30th of the Indicated Valuation Year $35,102 $33,407 $34,340 Pension Benefits $36,000 $27,000 $18,000 $9,000 $0 2002 2003 2004 2005 2006 2007 Valuation Year 5 2008 2009 2010 2011 2012 Actual Pension Benefit Payments by Fiscal Year (Amounts in Millions) $ 120 Benefit Payments 100 80 $111.8 60 $97.2 $105.0 40 20 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Plan Year Ending September 30th 6 Pension Assets (Amounts in Millions) 1,600 $1,202 1,200 Assets $999 $1,138 $1,069 $1,052 $967 800 400 0 2002 2003 2004 2005 2006 2006* 2007 2008 2009 2010 2011 2012 Valuation Year Market Value * After adjusting to market value. 7 Actuarial Value Actuarial & Market Net Rates of Return 19% 15.94% Rate of Return 14% 10.75% 9% 4.30% 1.90% 4% 0.79% -1% (0.44)% -6% -11% -16% 2002 2003 2004 2005 2006 2006* 2007 2008 Plan Year Ending September 30th Actuarial * After adjusting to market value. 8 Market 2009 2010 2011 2012 Investment Gain/(Loss) Investment Gain/(Loss) (Amounts in Millions) $100 80 60 40 20 0 -20 -40 -60 -80 -100 -$73.7 -$84.0 -$93.4 2002 2003 2004 2005 2006 2006* 2007 2008 2009 2010 2011 2012 Plan Year Ending September 30th * After adjusting to market value. 9 Demographic Gain/(Loss) (Amounts in Millions) $ 20 $14.2 Demographic Gain/(Loss) 10 $1.6 $0.3 0 -10 -20 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Plan Year Ending September 30th 10 Gain/(Loss) by Type of Activity (Amounts in Millions) Plan Year Ending 9/30 11 2012 2011 2010 2009 2008 2007 New Entrants Retiree Deaths (0.73) (5.57) (0.89) (5.38) (0.18) 0.56 (0.83) (1.68) (0.16) (3.98) 0.00 (3.98) Investments Pay Increases Withdrawal Retirements Other Total (93.39) 11.94 (0.02) (2.40) (2.93) (93.10) (84.04) 11.74 0.37 (2.64) (1.58) (82.42) (73.67) 11.17 0.90 (1.80) 3.55 (59.47) (74.30) 13.08 0.43 2.17 0.52 (60.61) (38.88) 3.74 2.44 1.15 0.20 (35.49) 21.47 (4.87) 0.41 (2.12) (2.44) 8.47 Historical Employer Contribution %’s Valuation as of September 30 53.11% Employer Contribution % 50% 45.80% 38.50% 37.10% 40% 35.49% 26.99% 30% 19.14% 19.70% 20% 10% 17.96% 18.80% 18.81% 17.62% 0% 2002 2003 2004 2005 2006 2006* 2007# 2008 2009 2010 2010^ 2011 2012# Valuation Year Normal Cost 12 * After adjusting to market value. # Revised benefit provisions. ^ Revised actuarial assumptions. Amortization Payment Actuarial Accrued Liability Compared to Actuarial Value of Assets (in millions) $1,800 $1,565 Dollar Amount 1,600 1,400 $1,671 $1,594 $1,628 $1,202 1,200 $1,202 $1,138 $1,069 1,000 800 600 400 200 0 2002 2003 2004 2005 2006 2006* 2007# 2008 2009 2010 2010^ 2011 2012# Valuation Year Actuarial Accrued Liability (AAL) 13 * After adjusting to market value. # Revised benefit provisions. ^ Revised actuarial assumptions. Actuarial Value of Assets (AVA) Retirement System Funded % Based on Actuarial Value and Market Value of Assets 120% Funded % 100% 77% 80% 64% 60% 75% 63% 70% 59%64% 63% 40% 20% 0% 2002 2003 2004 2005 2006 2006*2007# 2008 2009 2010 2010^ 2011 2012# Valuation Year Funded % based on AVA 14 * After adjusting to market value. # Revised benefit provisions. ^ Revised actuarial assumptions. Funded % based on MVA Unfunded as Percentage of Payroll 599% 600% 590% 574% 502% 478% 500% 444% 400% 331% 306% 300% 200% 100% 0% 2002 2003 2004 2005 2006 2006* 2007# 2008 2009 2010 2010^ 2011 2012# Valuation Year UAAL(AVA) as % of Payroll 15 * After adjusting to market value. # Revised benefit provisions. ^ Revised actuarial assumptions UAAL(MVA) as % of Payroll Comments on the Investment Markets Investment markets have been very volatile. Valuation is based on a 5-year smoothed value of assets. ► Reduces the volatility of the valuation results. 9/30/12 smoothed value of assets was higher than market value. ► Meeting the actuarial assumption will require average future market returns over 8% (Non-Hybrid assets). 9/30/12 valuation results based on market value: ► Funded percent would be 63.0% (instead of 64.0%). ► Employer contribution would be 54.16% (instead of 53.11%). 16 Circular 230 Notice: Pursuant to regulations issued by the IRS, to the extent this presentation concerns tax matters, it is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) marketing or recommending to another party any tax-related matter addressed within. Each taxpayer should seek advice based on the individual’s circumstances from an independent tax advisor. This presentation shall not be construed to provide tax advice, legal advice or investment advice. The actuaries submitting this presentation (Mita Drazilov and Louise Gates) are Members of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. 17