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Pension SubA Power Point 11-9-11
Pension SubA Power Point 11-9-11
Pension SubA Power Point 11-9-11
Staff Briefing November 9, 2011 House Finance Committee Senate Finance Committee
INTRODUCTION
Recap of recent actions
Sept 6th event for all members Briefings for both chambers from the Treasurer 3 joint Finance Committee Meetings in September 3 joint finance Committee Meetings to take public testimony
INTRODUCTION
Why Does It Matter?
Current projections have pension costs consuming larger proportion of resources State struggling to emerge from most recent economic downturn Still facing structural deficits in five-year forecast No near term projection to grow our way out of the problem
LEGISLATION: OVERVIEW
Suspends increases (COLAs) to retirees benefits until the system is better funded, BUT provides for intermittent COLA every 5 years Moves all but public safety employees to hybrid pension plans Increases minimum retirement age for most employees not already eligible to retire Preserves accrued benefits Begins addressing local plan solvency issues
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82%
80% 70% 60% 50% 40% 30% 1993 1995 1997 1999 2001 2003 2005 2007 2009 2010R
48%
FISCAL IMPACT: TEACHERS Valuation Results *(in millions) FY 2013 Contribution Rate Normal Cost Percentage Unfunded Liability* Funded Ratio Long Term Normal Cost FY 2013 Contribution* Out-years FY 2014 Contribution Rate FY 2015 Contribution Rate FY 2016 Contribution Rate 37.20% 39.39% 40.41% 21.41% 22.87% 23.40% -15.79% -16.52% -17.01%
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Sub A (est.) (incl. 1% DC) 20.45% 8.77% $2,389.3 61.2% 5.07% $211.4
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Benefit Accrual
COLA Vesting
PENSIONS: JUDGES
Current Plan
Eligibility Member Contribution Benefit Accrual 0% - Hired before 7/97 8.75% all others
New Plan
12.00%
Hired after July 1, 2009 80% full; 65% reduced 5 highest year Earlier hires have benefit as high as 100% of final salary 3% simple on first $35,000 on 3rd anniversary or age 65 Traffic and WC get compounded 10 years Risk adjusted: 2% w/ 7.5% return on first $25K 5 years
COLA Vesting
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EMPLOYEE CONTRIBUTION RATES: STATE EMPLOYEES & TEACHERS NO CHANGE FROM PROPOSAL
Group State Employee Teacher w/Soc. Sec. Teacher w/o Soc. Sec. Current 8.75% 9.5% 9.5% DB 3.75% 3.75% 3.75% Proposal DC Suppl. 5% n/a 5% 5% n/a 2% Total 8.75% 8.75% 10.75%
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Total assets of $1.2 billion as of June 30, 2010 Unfunded Actuarial Accrued Liability of $430.2 million as of June 30, 2010 Funded ratio of 73.6% as of June 30, 2010
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25 Years of Service or 55 with 10 Years 3 Year Average 2.0% annually with 75.0% maximum None 3.0% simple 7.0% 8.0%
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Other Issues
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RE-AMORTIZATION
No change to proposed re-amortization Act proposes to re-amortize the remaining unfunded liability over a 25-year period Provides for laddered re-amortization designed to smooth out the cliff effect and reduce volatility over a long period of time
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DISABILITY
Proposal requires those that apply and receive accidental disability after July 1, 2012 not totally disabled to have their tax-free disability benefit convert to a taxable service retirement benefit in the same amount upon their attainment of retirement age Reduces the floor for disability from 66.6% to 50.0% for all pension systems
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OTHER ISSUES
Survivor Benefits Allows a one year window for members who elected a survivor annuity option to change to singe life annuity option if beneficiary still living Incentive Pay Technical change to include incentive pay Back to current law
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OTHER ISSUES
Defined Contribution Vendor Selection Requires State Investment Commission to consider potential vendors disclosure of criminal convictions, judgments or regulatory fines assessed against them SSNR Social Security retirement age cannot exceed age 67 does not go up if feds change it
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OTHER ISSUES
Clarifying language that service credit purchases are based on date of application not completion of payment Retains requirement that they be made within 3 years of the date of initial eligibility for the purchase (or by July 1, 2015, whichever is later)
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