michigan state police retirement system · 0 1,000 2,000 3,000 4,000 5,000 2005 2006 2007 2008 2009...

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Michigan State Police Retirement System

Pension Actuarial Valuation Results as of September 30, 2015

Member Data

Actuarial

Valuation

Actuarial Cost Method

Financial Data

Plan Provisions

Actuarial Assumptions

%

Actuarial Valuation Process

2

0

1,000

2,000

3,000

4,000

5,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

1,521 1,516

45 42

2,9532,963 2,987

Nu

mb

er

of

Me

mb

ers

Valuation Year

Actives Inactives Retirees & Beneficiaries DROP Members

1,603

44

Membership Data

257 221

294

3

Ratio of Active Members to Pension Benefit Recipients

0

1

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

.52 .54.51

Valuation Year

4

Pension Benefits Expressed as %’s of Active Member Pay

5

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

95.9% 96.2% 99.3%

Valuation Year

0

10,000

20,000

30,000

40,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$35,813 $36,521

Pen

sio

n B

enef

its

Valuation Year

$37,260

Average Annual Pensions as of September 30th of the Indicated Valuation Year

6

$

0

20

40

60

80

100

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$110.8 $110.5 $115.5

Ben

efit

Paym

ents

Fiscal Year Ending September 30th

Actual Pension Benefit Payments by Fiscal Year (Amounts in Millions)

$

7

0

350

700

1,050

1,400

2005 2006 2006* 2007 2008 2009 2010 2011 2012 2013 2014 2015

$1,250

$1,127

$1,233

$1,069

$1,133 $1,197

Ass

ets

Valuation YearMarket Value Actuarial Value

Pension Assets (Amounts in Millions)

* After adjusting to market value.

8

$

5.81%

10.94%9.57%

13.18%15.75%

2.09%

-16%

-11%

-6%

-1%

4%

9%

14%

19%

2005 2006 2006* 2007 2008 2009 2010 2011 2012 2013 2014 2015

Ra

te o

f R

etu

rn

Plan Year Ending September 30th

Actuarial Market

Actuarial & Market Net Rates of Return#

* After adjusting to market value.

9 # Rates of return on Non Hybrid actuarial assets.

-100

-80

-60

-40

-20

0

20

40

60

80

100

2005 2006 2006* 2007 2008 2009 2010 2011 2012 2013 2014 2015

-$22.7

$30.7$17.4

Invest

ment

Gain

/(L

oss

)

Plan Year Ending September 30th

Investment Gain/(Loss) (Amounts in Millions)

$

* After adjusting to market value.

10

-20

-10

0

10

20

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

-$13.3

$4.7

-$6.5

Dem

ogra

ph

ic G

ain

/(L

oss

)

Plan Year Ending September 30th

Demographic Gain/(Loss) (Amounts in Millions)

$

11

Gain/(Loss) by Type of Activity (Amounts in Millions)

Plan Year

Ending 9/30 2015 2014 2013 2012 2011 2010

New Entrants * 0.00 0.00 0.00 (0.73) (0.89) (0.18)

Retiree Deaths (0.71) (2.78) (6.34) (5.57) (5.38) 0.56

Investments 17.43 30.70 (22.72) (93.39) (84.04) (73.67)

Pay Increases 5.40 8.93 (1.34) 11.94 11.74 11.17

Withdrawal (0.54) 0.42 0.36 (0.02) 0.37 0.90

Retirements (3.03) (0.75) (1.80) (2.40) (2.64) (1.80)

Other (7.62) (1.11) (4.20) (2.93) (1.58) 3.55

Total 10.93 35.41 (36.04) (93.10) (82.42) (59.47)

12

* New entrants with past service (rehires).

0%

10%

20%

30%

40%

50%

60%

2005 2006 2006* 2007# 2008 2009 2010 2010^ 2011 2012# 2013 2014 2014^ 2015

16.38%16.03% 15.31% 14.73%

37.43%36.85%

39.05%40.12%

Valuation Year

Normal Cost Amortization Payment

Historical Employer Contribution %’s Valuation as of September 30

53.81%

Em

plo

yer

Co

ntr

ibu

tio

n %

52.88%

* After adjusting to market value.

# Revised benefit provisions. ^ Revised actuarial assumptions.

54.85%

13

54.36%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2005 2006 2006*2007# 2008 2009 2010 2010^ 2011 2012# 2013 2014 2014^ 2015

$1,724 $1,764$1,851$1,800

$1,069$1,133 $1,133

$1,197

Do

lla

r A

mo

un

t

Valuation Year

Actuarial Accrued Liability (AAL) Actuarial Value of Assets (AVA)

Actuarial Accrued Liability Compared to

Actuarial Value of Assets (in millions)

$

* After adjusting to market value.

# Revised benefit provisions.

^ Revised actuarial assumptions. 14

0%

20%

40%

60%

80%

100%

2005 20062006*2007#2008 2009 20102010^20112012#2013 20142014^2015

62%64% 63% 65%

71%

65%

69% 67%

Fu

nd

ed %

Valuation Year

Funded % based on AVA Funded % based on MVA

Retirement System Funded % Based on Actuarial Value and Market Value of Assets

* After adjusting to market value. # Revised benefit provisions. ^ Revised actuarial assumptions.

15

0%

100%

200%

300%

400%

500%

600%

2005 2006 2006*2007# 2008 2009 2010 2010^ 2011 2012# 2013 2014 2014^ 2015

593%594%

561%584%

489%

542%

457%

551%

Valuation Year

UAAL(AVA) as % of Payroll UAAL(MVA) as % of Payroll

Unfunded as Percentage of Payroll

* After adjusting to market value. # Revised benefit provisions. ^ Revised actuarial assumptions

16

Comment on the Investment Markets and Other Issues

Investment markets have been very volatile

Valuation is based on a 5-year smoothed value of assets Reduces the volatility of the valuation results

9/30/15 smoothed value of assets was lower than market value Provides some margin for possible adverse investment

experience over the next few years

Optional Forms of Payment Needed mostly for Hybrid Plan members

Review factors based on recent experience study

17

This presentation is intended to be used in conjunction with the September 30, 2015 pension annual actuarial valuation report issued on April 19, 2016. This presentation should not be relied on for any purpose other than the purpose described in the valuation report.

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.

18

Disclaimers