MINUTES OF MEETING
STATE EMPLOYEE RETIREMENT COMMISSION
ACTUARIAL SUBCOMMITTEE

August 22, 2012

MEMBERS PRESENT
Linda Yelmini
Robert Baus
Charles Casella
Steve Greatorex
Claude Poulin

OTHER PRESENT
Brenda K. Halpin, Director, Retirement Services Division
Jeanne A. Kopek, Assistant Director, Retirement Services Division
Jean Reid, Retirement Services Division
Denise L. Nappier, State Treasurer
LeeAnn Palladino, Office of the State Treasurer
Sara Sanders, Office of the State Treasurer
Bonnie Bennett, Office of the Probate Court Administrator
Tom Cavanaugh, Cavanugh MacDonald
John Garrett, Cavanugh MacDonald
Ed Koebel, Cavanugh MacDonald

The meeting began at about 2:15.

Tom Cavanaugh presented the draft executive summary of Cavanaugh MacDonald'S findings and recommendations based on the economic and demographic results of the 2012 State Employees Retirement System experience study.

John Garrett explained the three economic assumptions used in the actuarial valuation of the retirement system: price inflation, investment return and wage inflation. He noted that the economic assumptions recommended in the draft report were developed in accordance with Actuarial Standard of Practice (ASOP) No. 27, "Selection of Economic Assumptions for Measuring Pension Obligations". Using a number of factors developed in accordance with actuarial standards, a reasonable range was stated for each assumption and the draft report recommendations were made based on the mid-point of the range. John advised that this resulted in the proposed recommendation of no changes to the current economic assumptions including the 8.25% assumed rate of return. John further advised however that, in light of the trend towards lower investment return assumptions, the report provides the impact to the valuation results under an alternative 8% rate of return.

Ed Koebel presented the proposed changes in the demographic assumptions based on the findings of the experience investigation. Mr. Casella commented on the change in the disability retirements and suggested that the numbers may have been inflated due to the reduction of the disability backlog.

The subcommittee discussed the possibility of changing the economic factors. Mr. Baus suggested reducing the inflation assumption by .25% and Mr. Poulin indicated that it would be reasonable to reduce the assumed rate of return from 8.25% to 8%.

Treasurer Nappier commented that while the 8.25% assumed rate of return was not inconsistent it was pushing the outer limit from an investment perspective. She further advised that there was no asset allocation that could be adopted which would bring us out from under the losses of the last ten years. Treasurer Nappier indicated her interest in the sustainability of the plan for participants and that her office was available to offer resources to explore options to improve the financial footing of the plan.

Ms. Yelmini expressed concern about approving economic changes not recommended by the actuary in their draft report.

Mr. Baus moved to adopt the changes to the demographic assumptions; Mr. Poulin seconded.
All voted in favor.

Mr. Baus moved to request that the actuaries provide the report with the addition of a recommendation to change the assumed rate of return and inflation rate and provide the subcommittee with the results. Ms. Yelmini voted against asking for the change and left the meeting. Mr. Greatorex also departed. Motion was approved by majority decision.

The Judges, Family Support Magistrates and Compensation Commissioners Retirement System (JFSMCCRS) and the Probate Judges and Employees Retirement System (PJERS) experience investigations were discussed.

Mr. Baus moved to adopt the recommended demographic assumptions for both JFSMCCRS and PJERS and make the same economic assumptions changes as requested for SERS; Mr. Poulin seconded. The subcommittee unanimously approved the motion.

The meeting adjourned at about 4:30 p.m.

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