Transcription of PROPOSED CHANGES IN ACTUARIAL ASSUMPTIONS AND …
1 PROPOSED CHANGES IN ACTUARIAL ASSUMPTIONS AND methods FOR DETERMINING EMPLOYER CONTRIBUTIONS FOR FISCAL YEARS BEGINNING ON AND AFTER JULY 1, 2011 FOR THE NEW york city EMPLOYEES RETIREMENT SYSTEM office OF THE actuary February 10, 2012 #'rW'Fllottr frl?fz!'*rJJ -alr4r.\, office OF THE ACTUARY75 PARK PLACE . 9n FLOORNEW york , NY IOOOTl2t2l442-5n5 . FAX: l2l2l u2-57nRosnnr C. NonrH. ACTUARYF ebruary 10, 2OI2 Board of TrusteesNew york city Employees'Retirement System335 Adams Street, SuiLe 2300 Brooklyn, NY LL20I-315 LRe: ACTUARIAL - and MethodsDear Members:This Report presents PROPOSED CHANGES in and methods for Determining Employer Contributionsfor Fiscal Years Beginning on and After July I, 2 OLI for the NewYork city Employees' Retirement will be pleased to discuss this Report and answer anyquestions you may have with regard to these findings S,ubmitted,A / /0/odnc-'V-Robert C.
2 North, Jr., FSA, MAAAC hief ActuaryRCN/srhn! : Ms. D. D'AlessandroMr. GibneyMr. Rumley219A&M-NYCERS: srh (i) TABLE OF CONTENTS SECTION ITEM PAGE Table of Contents i List of Tables iv Acronyms vi I Executive Summary 1 II Background and Introduction 27 III Philosophy for Developing an Appropriate Level of Employer Contributions 32
3 IV Comments on Findings and Recommendations Presented in December 2011 Hay Report and November 2006 Segal Report 36 V Development of Demographic ASSUMPTIONS 39 A. Decrements from Active Service B. Mortality after Retirement C. Post-retirement Reclassification-WTC VI Development of Economic ASSUMPTIONS 100 A. Background Concepts B. Consumer Price Inflation Assumption C. General Wage Increase Component of Salary Scale D. Merit Increase Component of Salary Scale E. ACTUARIAL Interest Rate Assumption F.
4 Investment Expenses VII Other ACTUARIAL ASSUMPTIONS and methods 153 A. Overtime B. ACTUARIAL Cost Method and Unfunded ACTUARIAL Accrued Liabilities C. One-Year Lag Methodology D. ACTUARIAL Asset Valuation Method E. Administrative Expenses F. Variable Supplements Funds (ii) TABLE OF CONTENTS SECTION ITEM PAGE VIII Financial Impact 174 IX Findings and Proposals 176 (iii) TABLE OF CONTENTS APPENDIX ITEM PAGE A Recent History of Investment Returns 180 B Recent History of Economic ASSUMPTIONS Used in ACTUARIAL Valuations 181 C ACTUARIAL Interest Rate ASSUMPTIONS Used by Public Employee Retirement Systems 186 D Tables of PROPOSED Demographic and Salary Scale ASSUMPTIONS 189 E Discussion of Financial Economics.
5 Funding and Disclosure 248 F Statement of ACTUARIAL Opinion 253 G Acknowledgements 254 (iv) LIST OF TABLES TABLE ITEM PAGE IA Comparison of Active Service Decrements Probabilities of Withdrawal 43 IB Comparison of Active Service Decrements Probabilities of Ordinary Mortality and Accidental Mortality 51 IC Comparison of Active Service Decrements Probabilities of Ordinary Disability and Accidental Disability 62 ID Comparison of Active Service Decrements Probabilities
6 Of Service Retirement 70 IIA Post-Retirement Mortality Valuation Tables Probabilities as a Percentage of Base Table Probabilities 83 IIB Comparison of Probabilities of Mortality After Service Retirement 86 IIC Comparison of Probabilities of Mortality After Disability Retirement 92 IIIA Comparison of Treasury Yields as of June 30, 1999 114 IIIB Comparison of Treasury Yields as of June 30, 2004 115 IIIC Comparison of Treasury Yields as of June 30, 2009 116 IIID Comparison of Treasury Yields as of June 30, 2010 117 IIIE Comparison of Treasury Yields as of June 30.
7 2011 118 IV Recent Consumer Price Inflation - Fiscal Year 1990 through Fiscal Year 2011 119 (v) LIST OF TABLES TABLE ITEM _ PAGE V Merit Increase Component of Salary Scale 127 VI New york city Employees Retirement System Overtime ASSUMPTIONS PROPOSED by the actuary 155 VII Estimated Financial Impact of PROPOSED CHANGES in ACTUARIAL ASSUMPTIONS and methods 174 VIII New york city Retirement Systems Rates of Investment Return Based on Market Value - Fiscal Year 1983 through Fiscal Year 2011 - By Retirement System
8 180 IX New york city Employees Retirement System Economic ASSUMPTIONS used in ACTUARIAL Valuations for Determining Employer Contributions 181 (vi) ACRONYMS This is a listing of acronyms used throughout this Report. ACTUARIAL Accrued AAL ACTUARIAL Asset Valuation AAVM ACTUARIAL Asset AAV ACTUARIAL Cost ACM ACTUARIAL Interest AIR ACTUARIAL Present APV ACTUARIAL Present Value of APVB ACTUARIAL Standard of ASOP ACTUARIAL Standard of Practice Number ASOP27 Actuarially-Determined ADC Administrative Code of the city of New ACNY American Statistical ASA Annual Required ARC Annuity Savings ASF city of New.
9 city Consumer Price CPI Correction Officers Variable Supplements COVSF Cost-of-Living COLA Economic Funded EFR Employer Normal Contribution ENCR Entry Age ACTUARIAL Cost .. EAACM Expected Investment EIR (vii) ACRONYMS Final FS Final Average FAS Frozen Initial FIL Gabriel, Roeder, Smith & GRS General Wage GWI Governmental Accounting Standards GASB Group Term Life GTLI Housing Police and Transit HP TP Housing Police Officers Variable Supplements HPOVSF Housing Police Superior Officers Variable Supplements HPSOVSF Improved Retirement IRP ITHP Increased Dollar.
10 IDP KPMG Peat ..KPMG Level Dollar .. LDP Market Value of MVA Market Value-related Accumulated Benefit MVABO National Bureau of Economic NBER Net Pension NPO New york city Board of Education Retirement BERS New york city Employees Retirement NYCERS New york city Fire Department Pension FIRE New york city Police Pension POLICE (viii) ACRONYMS New york city Retirement NYCRS New york city Teachers Retirement TRS New york State and Local Retirement NYSLRS New york State Teachers Retirement NYSTRS office of the OA One-Year Lag OYLM Patrolmen s Benevolent PBA P/E Public Employment Relations PERB Public Employee Retirement PERS The Hay Hay The Segal.
