Michigan State Police Retirement System Pension Actuarial Valuation Results

Michigan State Police
Retirement System
Pension Actuarial Valuation Results
as of September 30, 2011
Copyright © 2012 GRS – All rights reserved.
Actuarial Valuation Process
Member Data
Financial Data
Actuarial
Valuation
Actuarial Assumptions
Plan Provisions
%
Actuarial Cost Method
1
Membership Data
149
Number of Members
5,000
133
142
2,721 2,762
2,857
4,000
3,000
2,000
26
1,000
1,655
0
35
1,556
55
1,451
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Valuation Year
Actives
2
Inactives
Retirees & Beneficiaries
DROP Members
Ratio of Active Members to
Pension Benefit Recipients
1
.61
0
.51
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Valuation Year
3
.56
Benefits as %'s of
Pay
Pension Benefits Expressed as
%’s of Active Member Pay
89.0%
71.6% 77.8%
100%
80%
60%
40%
20%
0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Valuation Year
4
Average Annual Pensions
5
Pension Benefit Payments by Fiscal Year
(Amounts in Millions)
$ 120
Benefit Payments
100
80
60
$88.5
$97.2
$111.8
40
20
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Plan Year Ending September 30th
6
Growth of Pension Assets
(Amounts in Millions)
1,600
$1,238
Assets
1,200
$958
$1,202
$999
$1,138
$967
800
400
0
2001 2002 2003 2004 2005 2006 2006* 2007 2008 2009 2010 2011
Valuation Year
Market Value
* After adjusting to market value.
7
Actuarial Value
Actuarial & Market Net Rates of Return
19%
Rate of Return
14%
10.75%
9%
4.30%
2.01% 1.90%
4%
-1%
-6%
-7.33%
-11%
-16%
2001 2002 2003 2004 2005 2006 2006* 2007 2008 2009 2010 2011
Plan Year Ending September 30th
Actuarial
* After adjusting to market value.
8
0.79%
Market
Investment Gain/(Loss)
(Amounts in Millions)
$ 100
Investment Gain/(Loss)
80
60
40
20
0
-20
-40
-60
-80
-100
-$74.3
-$84.0
2001 2002 2003 2004 2005 2006 2006* 2007 2008 2009 2010 2011
Plan Year Ending September 30th
* After adjusting to market value.
9
-$73.7
Demographic Gain/(Loss)
(Amounts in Millions)
Demographic Gain/(Loss)
$20
$13.7
10
$1.6
0
-10
-20
2001
2002
2003
2004
2005
2006
2007
Plan Year Ending September 30th
10
$14.2
2008
2009
2010
2011
Gain/(Loss) by Type of Activity
(Amounts in Millions)
Plan Year
Ending 9/30
2010
2009
2008
2007
2006
New Entrants
(0.89)
(0.18)
(0.83)
(0.16)
0.00
(0.31)
Retiree Deaths
(5.38)
0.56
(1.68)
(3.98)
(3.98)
4.00
(84.04)
(73.67)
(74.30)
(38.88)
21.47
(5.38)
11.74
11.17
13.08
3.74
(4.87)
15.19
Withdrawal
0.37
0.90
0.43
2.44
0.41
0.18
Retirements
Other
(2.64)
(1.58)
(1.80)
3.55
2.17
0.52
1.15
0.20
(2.12)
(2.44)
1.68
(7.92)
(82.42)
(59.47)
(60.61)
(35.49)
8.47
7.44
Investments
Pay Increases
Total
11
2011
Historical Employer Contribution %’s
Valuation as of September 30
Employer Contribution %
54%
45.80%
44%
37.10%
32.62%
34%
14.70%
24%
14%
17.92%
19.14% 19.70%
26.99%
17.96%% 18.80% 18.81%
4%
-6%
2001 2002 2003 2004 2005 2006 2006* 2007# 2008 2009 2010 2010^ 2011
Valuation Year
Normal Cost
12
38.50%
* After adjusting to market value.
# Revised benefit provisions.
^ Revised actuarial assumptions.
Amortization Payment
Actuarial Accrued Liability Compared to
Actuarial Value of Assets (in millions)
Dollar Amount
$ 1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
$1,534
$1,238
$1,594
$1,202 $1,202
$1,628
$1,138
2001 2002 2003 2004 2005 2006 2006* 2007# 2008 2009 2010 2010^ 2011
Valuation Year
Actuarial Accrued Liability (AAL)
13
$1,565
* 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%
81%
80%
63%
60%
77%
64%
75%
63%
70%
59%
40%
20%
0%
2001 2002 2003 2004 2005 2006 2006*2007# 2008 2009 2010 2010^ 2011
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%
500%
467%
400%
478%
306%
300%
502%
444%
331%
240%
200%
100%
0%
-100%
-200%
2001
2002
2003
2004
2005
2006 2006* 2007# 2008
2009
Valuation Year
UAAL(AVA) as % of Payroll
15
* After adjusting to market value.
# Revised benefit provisions.
^ Revised actuarial assumptions
UAAL(MVA) as % of Payroll
2010 2010^ 2011
Comments on the Investment Markets
 Investment markets have been very volatile.
 Valuation is based on a 5-year smoothed value of assets.
º Reduces the volatility of the valuation results.
 9/30/11 smoothed value of assets was higher than market
value.
º Meeting the actuarial assumption will require
average future market returns over 8%.
 9/30/11 valuation results based on market value:
º Funded percent would be 59.4% (instead of 69.9%).
º Employer contribution would be 55.69% (instead of
45.80%).
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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.
17