2/14/07 State Chamber PERS/TRS Presentation

TO USE OR PRINT this presentation click : ============================================================== 2/14/07 State ChamberPERS/TRS Presentation Prepared By: Michael E. Lamb, CPA, CGFM Chief Financial Officer Fairbanks North Star Borough P.O. Box 71267 Fairbanks, AK 99707-1267 (907) 459-1370 ,The Problem The basic problem Is: The PERS system has become under-funded. Bottom-line, there is an unpaid bill. The question is: Whose unpaid bill, whose liability, is it anyway? Who should pay, and why? Our purpose today: Understand the bill, then reach consensus! BUT: Before we agree on what we should do, we need to understand what we are actually doing, now! , @ 6/30/05 18,262 88.2% Tier I 2,303 11.1% Tier II 138 0.7% Tier III $12.8B $7.1B $5.7B 20,703 100.0% Retirees & Beneficiaries The Employee Universe 73,299 Active & Retired Members Active Retired @ 6/30/05 Active Members: 33,730 Vested Terminations: 6,105 Non-vested Terminations With Balances: 12,761 Total “Active Side”: 52,596 71.8% 28.2% The actuary determines the cost of future benefits (the liability) for each employee in the PERS system. (Employee here means employees and elected officials.) ,Mile High View Of PERS Active Side Retired Side (Liabilities Fully Funded) Employee Accounts Employer Accounts All Retired EE Actuarial Liabilities Calculated EE Liabilities Allocated To ERs Pro-Rata By Years Total Of All ER Retired Liabilities = The RRA Liability $4.2B Unfunded Obligation – Drives PSC Rate $1.5B $7.1B EE & ER Adjusted Asset Accounts RRA Liability $5.7B $7.1B ER Accrued Liabilities RRA Assets RRA Assets Get Increased To Equal Liabilities RRA Assets Are Allocated To Employers Based Upon ER’s Pro-Rata Liability % Active Employee Liabilities Allocated To Employers Active Employee Actuarial Liabilities Calculated RRA Assets Benefits ,Significant PERS Timeline Points System Conversion, EE Transfers Not Reported To Actuary Individual Employee Accounts Get Credited With Interest State Absorbs The Retirement Reserve Account Loss/Shortage Most Current PERS System Information Available RetirementReserve Account Established/Used Legislature Authorized A “Shared Consolidated Normal Cost” Rate Defined Benefit Retirement Plan Becomes Effective Legislature Authorized Allocation Of Investment Income To RRA State Stopped ER Transfers To RRA At EE Retirement Retirement Reserve Account Created/Authorized “Statutorily” EE Contribution Account Transferred At Retirement (Within 1 Year) Related ER Contributions Transferred At Retirement Transferred Assets = RRA Liabilities No EE Accts To RRA At Retirmnt 1984 1974 1977 7/1/94 6/30/05 1/1/61 6/30/69 7/1/99 12/31/72 12/31/71 EE Accounts Maintained ER Accounts Maintained (Rate Swings A Problem!) ER Accounts Paid Pension & Refund Costs Contribution Rate Based on ER’s Actual Experience EE Contribution Acct Transferred At Retirement Related ER Contrbs NotTransferred At Retirement Transferred Assets Now Don’t Equal Liabilities At Retirement ,RRA $6.3B, 73.3% RRA $7.1B, 82.6% EE Accts $1.4B, 16.3% EE Accts $1.4B, 16.3% ER Accts $0.9B, 10.5% ER Accts $0.1B, 1.2% $0.1 $0.9 $1.0 $1.4 $2.1 $1.4 $1.4 $4.0 $5.8 $1.3 $6.3 $7.1 PERS Assets/Redistributions RRA $4.0B, 54.6% RRA $5.8B, 71.0% ? RRA $?B, ?% EE Accts $1.3B, 17.6% EE Accts $1.4B, 16.6% ER Accts $2.1B, 27.8% ER Accts $1.0B, 12.4% ? Pre Moving The 6/30 $800M From ER To RRA $8.6B @ 6/30/05 Post ER Transfer To RRA $9.4B @ 6/30/06 Post ER Transfer To RRA $7.4B @ 6/30/03 Post ER Transfer To RRA $8.2B @ 6/30/04 Post ER Transfer To RRA $8.6B @ 6/30/05 Pre ER Transfer To RRA ,Cousin Bud Example: Assignment of Retirement Liability $120k/yr comp. $100k/yr comp. $40k/yr comp. $50k/yr comp. $20k/yr comp. $90k/yr comp. $1k/yr comp. $1k/yr comp. 11/1/00 11/1/74 6/30/04 11/1/80 11/1/90 10 year City employee $30k/yr 6 years on School Board, $1k/yr 10 year UA employee $70k/yr 4 year State employee $110k/yr ,Actual RRA assets “allocated” from other employers to employer 232 Employer 232’s RRA liability deter...(read more)

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