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The South Carolina Retirement Systems                       VSThe S.C. Retirement System Investment Commission            ...
SCRS       PORS       GARS       JSRS   NGRS      TotalAnnuitants    111,394     12,566       346      194    3,951    128...
Monthly benefit payable for the member’s lifetimeRetirement age   65 with 5 years of service; or   any age with 28 years o...
The Depth            5
Is the defined benefit plan as it existed at7/1/2010 sustainable?Who bears the “risks and costs” of theplan?Can the system...
SCRS      PORSAssetsMarket Value                    $19.7B    $2.9BActuarial Value                 $25.4B    $3.6BLiabilit...
Funded Ratios for SCRS, PORS 1999-2010100%90%80%70%60%       1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010  ...
Actuarial assumptions:  One part educated guess  One part art  One part luck                            9
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Significant sources of revenue to the plans:   Employee Contribution: 6.5 percent   Employer Contributions:     SCRS – 10....
*12.09%14.00%                                                                                                             ...
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Make up a large share of                         An average over last 17        public pension revenues for               ...
25.00%20.00%                                                                                           18.59%15.00%       ...
Reduced actuarial assumed rate of return to 7.5percent from 8 percentStatute governing the provision of COLAs resulted in:...
Change retirement eligibilityActuarial cost for service purchaseLonger average final compensation periodLonger vesting per...
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SCRS and PORS are cost-sharing employer plansPension expense – the annual required contributionamount (ARC)Employer’s bala...
GASB issued two Exposure Drafts in July 2011Will amend financial statement reportingStatement 25 deals with the financial ...
The employment exchange creates a future obligationTo disconnect the accounting for pensions from thefunding of pensionsAd...
Require employers to recognize a portion of the UnfundedPension Liability on their balance sheetMarket value of assets use...
Employer has covered payroll of $20.4 millionTotal covered payroll of all SCRS employers equals $7.4billionEnd-of-year mar...
Employer has covered payroll of $60.9 millionTotal covered payroll of all SCRS employers equals $7.4billionEnd-of-year mar...
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THE LANGUAGE USED IN THIS PRESENTATION DOES NOT CREATE ANY CONTRACTUALRIGHTS OR ENTITLEMENTS AND DOES NOT CREATE A CONTRAC...
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Masc legislative action day 20120215

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Masc legislative action day 20120215

  1. 1. 1
  2. 2. The South Carolina Retirement Systems VSThe S.C. Retirement System Investment Commission 2
  3. 3. SCRS PORS GARS JSRS NGRS TotalAnnuitants 111,394 12,566 346 194 3,951 128,451 Inactive 156,871 11,899 36 4 2,683 171,493 Members Active 190,239 26,568 196 144 12,445 229,592 Members Total 458,504 51,033 578 342 19,079 529,536*Data as of July 1, 2010, actuarial valuation 3
  4. 4. Monthly benefit payable for the member’s lifetimeRetirement age 65 with 5 years of service; or any age with 28 years of serviceThe benefit is equal to 1.82% of members 3-year averagecompensation times their years of service Example: John Smith retires with an average final compensation of $48,000 and 28 years of service Annual retirement benefit is $24,460 (1.82% x $48,000 x 28) Replaces almost 50% of the members pre-retirement pay 4
  5. 5. The Depth 5
  6. 6. Is the defined benefit plan as it existed at7/1/2010 sustainable?Who bears the “risks and costs” of theplan?Can the system “invest” itself out of theproblem?What changes, if any, can “permanentlyfix” the plan? 6
  7. 7. SCRS PORSAssetsMarket Value $19.7B $2.9BActuarial Value $25.4B $3.6BLiabilitiesActuarial Accrued Liability $38.8B $4.9BActuarial InformationUnfunded Actuarial Liability $13.4B $1.2BAmortization Period 30 years 30 yearsFunded Ratio 65.5% 74.5%Unamortized Losses $5.7B $761M 7
  8. 8. Funded Ratios for SCRS, PORS 1999-2010100%90%80%70%60% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 SCRS PORS 8
  9. 9. Actuarial assumptions: One part educated guess One part art One part luck 9
  10. 10. 10
  11. 11. Significant sources of revenue to the plans: Employee Contribution: 6.5 percent Employer Contributions: SCRS – 10.6 percent Beginning July 1, 2012 PORS – 12.3 percent Beginning July 1, 2012Investment income 11
  12. 12. *12.09%14.00% 10.600%12.00% 9.535% 9.39% 9.39% 9.39% 9.21%10.00% 8.20% 7.70% 6.85% 6.85% 6.85% 6.85% 6.85% 6.85% 6.85% *6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 8.00% 6.25% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 4.00% 2.00% 0.00% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Employer Contributions Employee Contributions *Expected 12
  13. 13. 13
  14. 14. Make up a large share of An average over last 17 public pension revenues for years: mature plans Investment Earnings – 60% Employer contributions – 27% Employer Employee contributions – 13% Contributions 27% Employee Investment Contributions Earnings 13% 60%*Chart source: NASRA, 2010 (based on U.S. Census data). Reprinted in the Center on Budgetand Policy Priorities May 12, 2011 report. 14
  15. 15. 25.00%20.00% 18.59%15.00% 13.35% 14.62% 8.76%10.00% 7.15% 8.88% 7.02% 7.25% 8% 5.00% 4.75% 5.13% 2.45% 0.93% 0.00% Actual -5.00% -2.56% Return Assumed-10.00% Rate of Return-15.00%-20.00% -19.60%-25.00% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Average for 13-Year Period – 5.34% 15
  16. 16. Reduced actuarial assumed rate of return to 7.5percent from 8 percentStatute governing the provision of COLAs resulted in: SCRS – automatic 1 percent PORS – granted on an ad-hoc basisDecrease inflation assumption from 3% to 2.75%Improve the mortality assumptionOther miscellaneous demographic assumptions 16
  17. 17. Change retirement eligibilityActuarial cost for service purchaseLonger average final compensation periodLonger vesting periodEliminate TERI/RTW provisionsIncreased employee contributionPay benefit adjustments out of excess earningsPayments for unused annual leave not included in AFCUnused sick leave no longer counted as service credit in benefitcalculation 17
  18. 18. 18
  19. 19. 19
  20. 20. SCRS and PORS are cost-sharing employer plansPension expense – the annual required contributionamount (ARC)Employer’s balance sheet liability is the difference betweenthe ARC and actual contributionThe Unfunded Liability is reported in notes to theRetirement Systems’ financial statements 20
  21. 21. GASB issued two Exposure Drafts in July 2011Will amend financial statement reportingStatement 25 deals with the financial statementsof pension plansStatement 27 deals with the financialstatements of covered employers 21
  22. 22. The employment exchange creates a future obligationTo disconnect the accounting for pensions from thefunding of pensionsAdd additional note disclosures and required supplementalinformation 22
  23. 23. Require employers to recognize a portion of the UnfundedPension Liability on their balance sheetMarket value of assets used in calculating net pensionliabilityNew measure of pension expense in the financialstatementsReplacing most notes disclosures and removing actuarialfunding information 23
  24. 24. Employer has covered payroll of $20.4 millionTotal covered payroll of all SCRS employers equals $7.4billionEnd-of-year market value of assets equals $19.1 billion($20.4m/$7.4b = .002757 X $19.1b =$52.7 million net pension liability to be recognized byemployer on the face of the financial statements 24
  25. 25. Employer has covered payroll of $60.9 millionTotal covered payroll of all SCRS employers equals $7.4billionEnd-of-year market value of assets equals $19.1 billion($60.9m/$7.4b = .008230 X $19.1b =$157.2 million net pension liability to be recognized byemployer on the face of the financial statements 25
  26. 26. 26
  27. 27. 27
  28. 28. THE LANGUAGE USED IN THIS PRESENTATION DOES NOT CREATE ANY CONTRACTUALRIGHTS OR ENTITLEMENTS AND DOES NOT CREATE A CONTRACT BETWEEN THEMEMBER AND THE SOUTH CAROLINA RETIREMENT SYSTEMS. THE SOUTH CAROLINARETIREMENT SYSTEMS RESERVES THE RIGHT TO REVISE THE CONTENT OF THISPRESENTATION. OPINIONS EXPRESSED DURING THIS PRESENTATION AS TO THEAPPROPRIATE PUBLIC POLICY TO BE FOLLOWED REGARDING THE PLANSADMINISTERED BY THE SOUTH CAROLINA RETIREMENT SYSTEMS ARE THOSE OF THESPEAKER AND DO NOT NECESSARILY REFLECT THE OPINION OF THE RETIREMENTSYSTEMS, THE S.C. BUDGET AND CONTROL BOARD, THE GENERAL ASSEMBLY OR ANYPARTICULAR MEMBER OF THE GENERAL ASSEMBLY.This presentation is meant to serve as a guide but does not constitute a binding representation ofthe South Carolina Retirement Systems. The statutes governing the South Carolina RetirementSystems are found in Title 9 of the South Carolina Code of Laws, and should there be any conflictbetween this presentation and the statutes or Retirement Systems’ policies, the statutes andpolicies will prevail.Employers covered by the South Carolina Retirement Systems are not agents of theRetirement Systems. 28

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