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  1. 1. RESPONSE TO SUPPLEMENTAL QUESTIONS Actuarial Services RFP 1. Please provide more information on what is involved with asset/liability modeling. Is it a comprehensive study, or assistance for your investment consultants. May we see an example of what was provided previously? Will this be required each year, or in one specific future year? A. The asset/liability modeling would be expected once during the five year contract term. This service recently has been provided by the investment consultant. The most recently completed study was done in 2004, but a new asset/liability study is being done now also. The actuary’s involvement would be in support of the investment consultant. The actuarial firm is expected to supply actuarial data to the investment consultant, and comment on the process and study as appropriate. An example of the most recently completed asset/liability study is included as EXHIBIT 1. 2. When will the next experience study be performed? May we have a copy of the most recent study? A. The next experience study will be conducted no later than, and likely in, 2011. State statute requires SURS to have an actuarial experience study conducted at least every five years. Every five years has also been SURS’ past practice. A copy of the most recently completed experience study is included as EXHIBIT 2. 3. What is the current fee arrangement with the current actuary? What services are included and what are the fees. A. The current contract with the current actuarial firm is attached as EXHIBIT 3. Fees for additional services beyond the current contract have been negotiated prior to initiating those services. 4. Would SURS view it as a conflict of interest with the proposed services if the actuarial firm had a contract with the Illinois Comptroller's office for calculating the effective interest rate for SURS and other state funds? A. Yes. 5. Is SURS able and willing to consider some level of liability limits and some alternative to jury trial to resolve disputes in a contract for the proposed actuarial services? In Section IV.A. of the RFP it is stated that, "The firm may not seek to unreasonably limit 1
  2. 2. their liability for negligence or breach of fiduciary duty." What would constitute an "unreasonable" limitation on liability? A. If a response containing liability limits and/or an alternative to jury trial is considered, those conditions will be considered less positively than the absence of those conditions. If the responder seeks a limitation of liability or an alternative to jury trial, the response should also provide support for the reasonableness of that request. Reasonableness will be based on the totality of the response. To the extent the Illinois Pension Code (40 ILCS 5/1-101, et seq) imposes fiduciary duties by statute, those duties cannot be contracted away. 6. Why are these services out to bid? A. The contract with the current provider will expire at the end of the current fiscal year, as planned to coincide with a regular schedule of review (typically at least every five years), which is the practice of SURS for all service providers. 7. What is the estimated budget for the services requested? A. There has been no budget estimate prepared for the services requested. The budget for FY 2009 has not yet been prepared by staff nor approved by the Board of Trustees. 8. What were the fees collected during the previous two years for cost studies in excess of six (Section B.iii) and special actuarial studies (Section C.vii)? A. Actuarial fees outside the normal retainer and annual valuation amount for the last two fiscal years were: FY 06 $ 38,261 FY 07 $ 55,683 9. What period did the most recent experience study cover? For any periods that will be covered under the next experience review but where census data will not have been collected as part of the regular valuation/reconciliation process, how will this additional data be made available? A. The last experience study covered a five year period ending June 30, 2006. SURS staff will provide census data for all periods covered by the experience study (although tests for reasonableness should be a part of the experience study). 10. How can we obtain a copy of last year’s valuation reports relevant to this contract? 2
  3. 3. A. Last year’s actuarial valuation is included as EXHIBIT 4. 11. With respect to asset/liability modeling: • Will this be a stochastic or deterministic exercise? • Approximately how many scenarios and assumptions would be modeled? • Is a sample report available from a previous asset/liability study? • How often is the asset/liability modeling to be performed? A. See answer to Question 1., above. The investment consultant’s most recent asset/liability modeling was stochastic, utilizing 500 scenarios for each assumption with between 3 and 10 assumptions. 12. How long has the current actuary been providing these services? A. Since July 1, 1996. 13. Please provide a copy of the most recent: • Actuarial Valuation report of the defined benefit plan, • Actuarial valuation report of the self-managed disability benefit plan, • Experience review. A. See EXHIBIT 4 and EXHIBIT 2. We are currently conducting the first actuarial valuation of the disability portion of the Self-Managed Plan. 14. Do you have examples of the asset liability modeling deliverable provided by the current actuary? How frequently are studies of this nature provided? Are fees for these to be included in the annual retainer? A. We have no separate work product showing our current actuarial firm’s involvement with the asset/liability modeling done by the investment consultant. See answer to Question 1., above. The actuarial firm should separate those fees from the annual retainer fee. 15. Has an actuarial audit of SURS ever been performed by an independent actuarial firm? If so, please provide a copy of the most recent actuarial audit report. A. Yes. A copy of the most recent actuarial audit report is included as EXHIBIT 5. 16. When has SURS traditionally provided the data for the valuations each year? 3
  4. 4. A. A typical schedule for information exchange is: July 10 – Retiree Data Received from SURS July 27 – Reasonableness Review Issues to SURS August 4 – Retiree Data Questions Resolved August 4 – Non-Retired Data Received from SURS August 18 – Asset Information Received from SURS August 18 – Non-Retired Data Review Issues Resolved 17. The first of the General Duties listed in Section III.A. of the RFP relates to data. The first sentence says, "Load and reconcile all the data in the SURS data base." Does this mean that each year the actuary should load and reconcile the data provided for the actuarial valuation by the Staff? Or, does this suggest a special job to be performed relative to the entire SURS data base? A. This means that the actuary will be responsible for loading onto its system the data necessary to do the actuarial valuation. The data will be provided by the staff of SURS, through a secure FTP process. 4