1 / 57

Update on SC Retirement Systems

Update on SC Retirement Systems. May 7, 2012 Tammy B. Nichols. About the Retirement Systems. Five defined benefit retirement plans South Carolina Retirement System (SCRS) Police Officers Retirement System (PORS) General Assembly Retirement System (GARS)

glenda
Télécharger la présentation

Update on SC Retirement Systems

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Update on SC Retirement Systems May 7, 2012 Tammy B. Nichols

  2. About the Retirement Systems • Five defined benefit retirement plans • South Carolina Retirement System (SCRS) • Police Officers Retirement System (PORS) • General Assembly Retirement System (GARS) • Judges and Solicitors Retirement System (JSRS) • National Guard Retirement System (NGRS) • One defined contribution retirement plan - State Optional Retirement Program (ORP) • More than 500,000 members in total • Approximately 850 participating employers

  3. About the Retirement Systems Membership *Data as of July 1, 2011, actuarial valuations (draft) 3

  4. How the Plans Are FundedFiscal Year 2011-2012 Sources of Revenue • Employee Contributions - 6.50% • Active Members • Working Retirees (including TERI participants) • Employer Contributions - • SCRS: 9.385% + .15% incidental death = 9.535% • PORS: 11.363 + .20% incidental death + .20 % accidental death = 11.763% • Investment Income

  5. Investment Earnings • Assumed rate of return on investments = 7.5 percent • Actual Returns: • FY 2011 = 18.59 percent • FY 2010 = 14.62 percent • FY 2009 = (19.60 percent) • 5 year average return = 3.95 percent • 10 year average return = 5.02 percent • 20 year average return = 6.81 percent • As of 2011 actuarial valuation for SCRS – • $3.2 billion of deferred losses

  6. How the Plans Are Funded – All Systems Fiscal Year 2010-2011 (Amounts expressed in thousands)

  7. Additions to Pension Trust Funds

  8. Actuarial Status - Where We Are Today *2010 Actuary Valuation required Employer Contribution increase of .92 and 2011 Valuation recommends another 1.63 increase 8

  9. How We Got Here – SCRS

  10. How the Plans Are FundedSCRS Ratio of Contributions Received to Benefits Paid Note: Contributions for TERI participants, working retirees and State ORP participants are included in contribution amounts

  11. Possible Ways to Improve Funding • Increase employee contributions • Increase employer contributions • Increase investment earnings • Reduce benefits/plan changes • Appropriate additional funds

  12. The Future • House and Senate Sub-Committees have conducted public hearings and have thoroughly studied the plans administered by the Retirement Systems • The House proposed legislation to modify the plans – H4967 • Senate Finance Committee has recommended amendments to H4967

  13. Proposed Legislation Overview of H.4967As Passed by S.C. House of Representatives Approved by House 3/21/2012 Introduced in Senate 3/27/2012 Referred to Senate Finance Committee Senate Finance Committee Recommended Amendments to House Bill 5/3/2012

  14. House Bill - H.4967 • Represents the intent of its sponsors in the House of Representatives in determining matters of policy. • Still has to be considered by the Senate.  The Senate may make substantive changes before passing or they may not pass it at all. • The role of the Retirement Systems is simply to provide information to the policy makers in the House and Senate to aid them in their decisions.

  15. Introduction to H.4967Effective Date of the Bill is July 1, 2012 • Most of the provisions of the Bill would apply to all SCRS and PORS members • Protection is provided for benefits earned prior to the effective date of the bill for members of SCRS and PORS • Bill would create a new class of membership in SCRS only – Class Three. (Current members are in Class Two.) • Newly hired members who have an effective date of membership after the effective date of the Bill would be in Class Three • Class Three members would be eligible for full retirement after 30 years of service or age 65 • TERI program would be closed to Class Three members

  16. Proposed Employee Contributions • SCRS Class Two and Three Members • 6.50 percent current rate • 7.00 percent effective July 1, 2012 • 7.50 percent effective July 1, 2013 • PORS Class Two Members • 6.50 percent current rate • 7.00 percent effective July 1, 2012 • 7.50 percent effective July 1, 2013

  17. Proposed Employer Contributions • SCRS (rates include .15 percent for incidental death) • 9.535 percent current fiscal year • 10.60 percent beginning July 1, 2012 • 12.23 percent beginning July 1, 2013 • (Required by July 2011 actuary valuation if no legislative changes made) • PORS (rates include .20 percent for incidental death and .20 percent for accidental death) • 11.763 percent current fiscal year • 12.30 percent beginning July 1, 2012 • 12.30 percent beginning July 1, 2013

  18. Proposed Employer Contribution Floor • For SCRS Members • After June 30, 2012, no less than 10.6 percent of total earnable compensation until accrued liability contribution is no longer required • For PORS Members • After June 30, 2012, no less than 12.3 percent of total earnable compensation until accrued liability contribution is no longer required

  19. Proposed Service Purchase CostAs of Effective Date of Bill • For SCRS and PORS Members • Actuarially neutral cost based on member’s age, service credit, and current or career highest fiscal year salary • Cost would not be less than 35 percent per year for nonqualified service • Cost would not be less than 16 percent per year for all other types of qualified service • New rates do not apply to re-establishment of withdrawn service, transfers or other allowable supplemental types of service

  20. Retirement Credit for Unused Sick Leave As of Effective Date of Bill • For SCRS and PORS Members • Members would not receive additional service credit for unused sick leave at retirement • Protection would be provided for benefits earned prior to effective date of legislation

  21. Five-Year AFC PeriodAs of Effective Date of Bill • For All SCRS and PORS Members • Average final compensation (AFC) would be based on a five-year period rather than current three-year period • Protection would be provided for benefits earned prior to effective date of legislation

  22. Payment for Unused Annual Leave As of Effective Date of Bill For All SCRS and PORS Members • Termination payment for unused annual leave at retirement would not be included in AFC calculation • Protection would be provided for benefits earned prior to effective date • Contributions would be collected on unused annual leave payments until July 1, 2015 because of benefit protection provision

  23. Overtime PayAs of Effective Date of Bill SCRS Members • After June 30, 2012, overtime payments would not be included in member’s earnable compensation or AFC unless pay is for overtime work as “mandated” by their employer (i.e., non-voluntary overtime) PORS Members • Overtime will continue to be included in earnable compensation or AFC

  24. Cost-of-Living AdjustmentsAs of Effective Date of Bill (would apply starting with July 1, 2013 COLA) For All SCRS and PORS Members • Current COLA provisions would be repealed • Going forward, COLAs would be called “Benefit Adjustments” (BA) • BA’s would be determined using a trigger related to actual investment returns based on a trailing five-year average compared to actuarial assumed rate of return

  25. Benefit AdjustmentsAs of Effective Date of Bill Benefit Adjustment Determination • When five-year average exceeds assumed rate of return (currently 7.5 percent), a benefit adjustment would be paid • Amount of benefit adjustment would be equal to the difference between the five-year average of actual returns and the assumed rate of return, up to a total benefit adjustment of 2.5 percent

  26. Benefit AdjustmentsAs of Effective Date of Bill Benefit Adjustment Determination • If the five-year average doesn’t exceed the assumed rate of return, no benefit adjustment would be paid for that year. • Regardless of the five-year average return, no benefit adjustment would be paid in any year in which actual returns for that year were less than zero

  27. SCRS Class Three MembershipAs of Effective Date of Bill • Creates a new class of membership for employees who become members of SCRS after the bill’s effective date – Class Three members • All of the new provisions of the bill apply to Class Three members

  28. SCRS Class Three MembershipAs of Effective Date of Bill Class Three Retirement Eligibility • Age 60 with five or more years of earned service or 30 years of service credit • Early retirement provisions would be based on 30-year retirement eligibility rather than 28-year retirement eligibility • TERI program would be closed only to Class Three members

  29. Benefit Protection ProvisionAs of Effective Date of Bill • Also referred to as “wear away” provision • Designed to protect benefits earned prior to the effective date of bill • Sets forth comparison of two benefit calculations as explained on following slides

  30. Benefit Protection ProvisionAs of Effective Date of Bill Benefit Provisions for any member retiring after June 30, 2012: • Retirement benefit will first be calculated using new provisions - • Five-year AFC period at date of retirement • No payment for unused annual leave at retirement is included in the AFC calculation • No additional retirement service credit for unused sick leave

  31. Benefit Protection ProvisionAs of Effective Date of Bill For members retiring after June 30, 2012 - • Second “protective” calculation would be made to determine member’s accrued benefit as of June 30, 2012, using: • Three-year AFC period as of June 30, 2012 • Inclusion of payment for 45 days of unused annual leave in AFC regardless of when paid • Service credit as of June 30, 2012 plus credit for 90 days of unused sick leave

  32. Benefit Protection ProvisionAs of Effective Date of Bill For members retiring after June 30, 2012 - • Second calculation protects the benefit member had accrued as of June 30, 2012 • Second calculation sets a “floor” on the benefit that a member may receive upon actual retirement

  33. Benefit Protection ProvisionAs of Effective Date of Bill For members retiring after June 30, 2012 - • If first benefit calculation under new provision is higher than the second benefit calculation using protective provisions, member would receive the higher benefit based on new benefit calculation • If second benefit calculation under protective provision is higher than the first benefit calculation using new provisions, member would receive the higher benefit based on second protective benefit calculation

  34. Benefit Protection ProvisionAs of Effective Date of Bill For members retiring after June 30, 2012 - • As member accrues additional service credit and receives salary increases after June 30, 2012, it will be more likely that the member’s benefit calculated under the new provisions would be greater than the floor benefit calculated using the protective provision • Hence the term “wear away” provision

  35. Example of Retirement Calculation Under Protection Provision Member retires on June 30, 2014 with 28 years of service. The member has the following earnable compensation and service credit for the trailing five years:

  36. Example of Retirement Calculation Under Protection Provision Benefit calculation for June 30, 2014 date of retirement using new provisions: • Five Year AFC = $30,000 + $32,000 + $34,500 + $36,000 + $37,500 (No annual leave)/5 yrs = $34,000 • Service Credit at Retirement = 28 years • Monthly Benefit = 28 yrs x $34,000 AFC x .0182 = $17,326/12 = $1,444 per month

  37. Example of Retirement Calculation Under Protection Provision Benefit calculation for June 30, 2014 date of retirement using protective provision with benefits accrued as of June 30, 2012: • Three Year AFC at June 30, 2012 = $30,000 + $32,000 + $34,500 + $5,971 (45 days annual Leave)/3 yrs = $34,157 • Service Credit at June 30, 2012 (including credit for 90 days unused sick leave) = 26 years, 4 months and 15 days (26.375 years) • Monthly Benefit = 26.375 yrs x $34,157 AFC x .0182 = $16,396/12 = $1,336 per month

  38. Summary of Retirement Calculations Under Both Provisions • Under the first or new calculation method, the monthly benefit would be $1,444 • Under the second or protective calculation, the monthly benefit would be $1,336 • In this case, the first calculation using the new provision is more than the second benefit calculation so the member receives the higher benefit set out in the first calculation

  39. Bill Provisions Impacting General Assembly Retirement System (GARS) • Increases GARS member contribution rate from 10 percent to 11 percent starting in calendar year 2013 • Repeals provisions which allow GARS members to retire in place and receive retirement benefits while continuing to serve in the General Assembly • Adjusts service purchase to actuarial neutral cost in same manner as for SCRS and PORS

  40. Other ProvisionsAs of Effective Date of Bill • Authorizes the General Assembly to set the actuarial assumed rate of return on Systems’ investments for valuation purposes • Initially sets the assumed rate of return by statute at 7.5 percent • Changes retirement accounts for inactive members such that they would no longer accrue annual interest like active member accounts (i.e. 4 percent annually)

  41. Senate Finance Committee Recommendations Reported Out May 3, 2012 • SCRS & PORS Retirement Benefit Adjustment – 1% of annual annuity up to a maximum of $500 • SCRS – New employees have same age eligibility, but proposed Rule of 90 replaces 28 year eligibility • PORS – New employees eligible for retirement after 27 years or age 55 • SCRS & PORS – 5 year AFC for new employees only • SCRS & PORS – provisions that remove credit for unused annual and sick leave apply only to new employees

  42. Senate Finance Committee Recommendations May 3, 2012 (continued) • Service Purchase Cost – adopt House version • SCRS and PORS Employee Contribution Rates – increase ½ percent for three years • Employer Contribution Rates – maintain differential between Employee and Employer Rates of 2.9% for SCRS and 5.0% for PORS • Inclusion of Overtime Pay in AFC – same as House • TERI – Closes TERI for new employees plus phases out for existing employees with termination of the program June 30, 2018

  43. Senate Finance Committee Recommendations May 3, 2012 (continued) • GARS – 1% additional employee contribution for GARS members as suggested by House. Closes GARS to newly elected members of General Assembly and they can elect to participate in SCRS, ORP or opt out completely. • SCRS & PORS – changes vesting from 5 to 8 years for new members • Interest on Inactive Member Accounts – eliminates interest accrual (same as House)

  44. Senate Finance CommitteeRecommendations May 3, 2012 (continued) • SCRS & PORS Return to Work – Benefits for members who retire after 6/30/12 will be subject to $10,000 earnings limitation and 15 day break in service unless: • SCRS member is age 62 at retirement • PORS member is age 57 at retirement • Return to work conditions do not apply to elected officials or members appointed by Senate (i.e. Magistrates) • Establishes governance structure that creates professional Board of Trustees to manage the Retirement Systems, EIP and Insurance Reserve

  45. Timing of Possible Legislation Senate Finance Committee’s recommended amendments will go to the Senate floor for debate and then back to the House for consideration.

  46. Other Retirement System Initiatives From an Operational Perspective

  47. Other Retirement System Initiatives Member Access - Member Access is an internet based application that was deployed in October 2011 which allows both active and retired members to access their retirement account. After completing a simple online registration process, a member may access information specific to their account with the SC Retirement Systems.

  48. On-Line Member Access - Active Members Functionality includes ability to: • View your accounts by System • View & print member statement • View your beneficiaries • Change your address New features scheduled (available May 25th): • Ability to submit a service purchase request electronically • Ability to view service purchase invoice

More Related