1 / 49

Wisconsin Retirement System

Wisconsin Retirement System. 2000-2002 Experience Study. December 11, 2003. Gabriel, Roeder, Smith & Company. Introduction. Each year the actuarial liabilities of WRS are valued.

kineks
Télécharger la présentation

Wisconsin Retirement System

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. Wisconsin Retirement System 2000-2002 Experience Study December 11, 2003 Gabriel, Roeder, Smith & Company

  2. Introduction • Each year the actuarial liabilities of WRS are valued. • In the valuation, assumptions are made regarding the future experience of the system with regard to various risk areas…

  3. Risk Areas • Active members • Rates of withdrawal • Rates of disability • Patterns of salary increases • Rates of retirement • Rates of mortality

  4. Risk Areas (Continued) • Retirees • - Rates of mortality - normal • - Rates of mortality - disabled lives • Economic • - Rates of investment return • - Inflation Statutes provide for an in-depth study of assumptions every 3 years.

  5. Introduction Assumptions should be carefully chosen and continually monitored. Continued use of outdated assumptions can lead to ...

  6. Introduction • Understated costs resulting in either an inability to pay benefits when due, or sharp increases in required contributions at some point in the future.

  7. Introduction • Overstated costs resulting in either benefit levels that are kept below the level that could be supported by the computed rate, or • An unnecessarily large burden on the current generation of members, employers and taxpayers.

  8. Introduction • A single set of assumptions will not be suitable indefinitely. • Things change, and our understanding of things (whether or not they are changing) also changes.

  9. Introduction • In recognition of this, assumptions are periodically studied in depth. • Assumptions are then adjusted to reflect experience trends -- but not random year to year fluctuations.

  10. Basics of an Experience Study • Decrements relate to things that happen to people. • Start by counting people (easy, right?). • Divide number who actually decremented by number eligible to decrement to get the crude rate.

  11. Basics of an Experience Study • Examine crude rates for consistency with known human behavior patterns, prior observation, etc. • Assign a credibility factor to the crude rates based upon the group size and upon whatever external factors may have biased the observations.

  12. Basics of an Experience Study • Develop trial rates, which are a weighted average of crude rates, and prior assumptions, where the weight is the credibility factor. • Smooth the trial rates and test for reasonableness and consistency with WRS data and other known data sources.

  13. Credibility Factors • Credibility factors in this study ranged from under 10% to over 90% • Most factors were between 50% and 90%

  14. 2000 – 2002 Experience Study More on Credibility • Larger sample size • 60% - 90% credibility factor was often applied to the 2000 – 2002 findings • Smaller sample size • - 50% - 60% credibility factor was typically applied to the 2000 – 2002 findings

  15. Understanding Impact of Changes

  16. Summary of Decrement Experience • Withdrawal • General • Less than 5 – Decreased for Males, Increased for Females • More than 5 – Approximately same • Schools • Less than 5 – Increased for Public Schools, Decreased for University • More than 5 – Approximately same for Public Schools, Decreased for University • Protective • Less than 5 – Decreased • More than 5 – Approximately same • Executive & Elected • Less than 5 – Increased • More than 5 – Decreased

  17. Summary of Decrement Experience • Disability • Varies by group • Retirement NormalEarly • General Decreased Decreased • Schools Increased Increased • Protective Decreased N/A • Executive & Elect. Decreased Decreased • Mortality • Males – Decreased • Females – Approximately the same

  18. Male General Participants Comparison of Aggregate Withdrawal Rates

  19. Female General Participants Comparison of Aggregate Withdrawal Rates

  20. Male General Withdrawal Experience Up to 5 Years of Service at Assumed Termination

  21. Male General Withdrawal Experience More than 5 Years of Service at Assumed Termination

  22. Male General Participants Rates of Withdrawal with Less than 5 Years of Service

  23. Male General Participants Rates of Withdrawal with 5 or More Years of Service

  24. Female General Participants Rates of Withdrawal with Less than 5 Years of Service

  25. Female General Participants Rates of Withdrawal with 5 or More Years of Service

  26. Male General Participants Rates of Normal Retirement

  27. Male General Participants Rates of Early Retirement

  28. Female General Participants Rates of Normal Retirement

  29. Female General Participants Rates of Early Retirement

  30. General Members - Merit and Longevity Pay Increase Assumptions Gross Salary Increases - Correlation by Age

  31. General Members - Merit and Longevity Pay Increase Assumptions Gross Salary Increases - Correlation by Service

  32. General Members - Merit and Longevity Pay Increase Assumptions

  33. Summary of Withdrawal Experience

  34. Summary of Disability Experience # Actual figures based on Adjusted Experience.

  35. Summary of Early Retirement Experience

  36. Summary of Normal Retirement Experience * Includes Early Retirements. ** Figures shown are for people below age 70.

  37. Summary of Mortality Experience

  38. Male Retired Life Mortality StudyNormal Retirement, Original Annuitants Only

  39. Female Retired Life Mortality StudyNormal Retirement, Original Annuitants Only

  40. Economic Assumptions

  41. Historical Patterns of Investment Return, Pay Increases and Inflation

  42. Historical Patterns of Investment Return, Pay Increases and Inflation

  43. Historical Patterns of Investment Return, Pay Increases and Inflation

  44. Wage Inflation • The present assumptions is 4.5%. • WRS has averaged 4.1% a year. • Longer term national averages are higher due to excess inflation during the 1970s. • Recommendation: 4.1%

  45. Real Investment Return • The present assumption is 3.5%. • Markets have produced net real returns for balanced funds in the 4.3% area since 1960. • A larger real return assumption would also be in line with contemporary practice among large public systems. • Recommendation: 3.7%

  46. Economic Assumptions • Nominal Investment Return is the sum of the inflation base plus the net real return. • Current assumption is 8.0%. • Recommendation: 7.8%

  47. Hypothetical Valuation Results December 31, 2002

  48. Hypothetical Valuation Results December 31, 2002

  49. Implementation Schedule Active and Inactive Lives Valuation: 12/31/2003 Retired Lives Valuation: 12/31/2003 Option Factors: 10/01/2004

More Related