MINUTES OF MEETING
STATE EMPLOYEE RETIREMENT COMMISSION
ACTUARIAL SUBCOMMITTEE
November 16, 2011

TRUSTEES PARTICIPATING

Robert Baus
Charles Casella
Richard Cosgrove
Steve Greatorex
Claude Poulin
Absent - Linda Yelmini, Trustee

OTHER PARTICPANTS

Tom Landy, Municipal Liaison
Brenda Halpin, Director, Retirement Services Division
Helen Kemp, Assistant Director, Retirement Services Division
Katie Balut, Supervisor, CMERS Unit, Retirement Services Division
Jean Reid, Accountant, Retirement Services Division
Philip Bonanno, Buck Consultants
Janet Cranna, Buck Consultants

The meeting began at approximately 2:05 p.m.

1. MERS Roll Forward

Mr. Bonanno began by presenting the highlights of the October 25, 2011 "roll forward" (the off year biennial valuation) for the Connecticut Municipal Employees retirement system (CMERS). He gave an overview of its findings and conclusions. He noted that with regard to the "roll forward" the date from the 2010 valuation is used.

Concerning the CMERS fund assets, Mr. Bonanno stated that with smoothing of gains and losses, the asset return was approximately 17.6%. He added that although there was still a loss (stemming from the 2008 market correction) it was much less than the previous year. He stated that CMERS was 85.5% funded using the market value of the assets which was good for a public retirement system. At the request of the Buck actuaries, there was discussion about changing the asset methodology.

Mr. Landry, the Municipal Liaison suggested the Commission review ways to increase the Fund without raising the employers' rate. He suggested legislation be proposed to increase the level of employee contribution, that CMERS provisions should be reviewed and a new CMERS "tier" created. He expressed concern that the employers' rate was again raised, the rate of return appeared good but yet it appears that there was still a loss. Mr. Bonanno explained that market conditions during the past few years were very challenging and the fund was still adversely affected but if the current market rate of return continues, the situation should improve.

Following lengthy and detailed discussion concerning contributions and asset valuation methods, a motion was made by Mr. Baus to leave the 8.25% rate of interest intact and to keep the asset methodology the same until the experience study has been completed (next year). Mr. Poulin second. Unanimous decision.

Mr. Baus moved that the subcommittee accept the recommendations of the actuary as expressed in its October 25, 2011 "roll forward" and in turn recommend to the Retirement Commission that for fiscal year 2012-2013, the total contribution rate for General Employees with Social Security be set at 11.79%; the total contribution rate for General Employees without Social Security be set at 11.73%; the total contribution rate for Police/Fire Employees with Social Security be set at 16.65%; the total contribution rate for Police/Fire Employees without Social Security be set at 15.35%. Unanimous decision. Buck will draft and send the employer contribution letter out at the end of December and apprise MERS employers of the increase.

2. PFSBF Roll Forward

The subcommittee next reviewed and discussed Buck's October 28, 2011 "roll forward" with regard to the Police and Fire Survivor Benefit's Fund (PFSBF). Concern was expressed with regard to the amount of surplus left in the PFSBF and that the contribution rate may have to be increased. The subcommittee discussed issuing "warning letters" to the PFSBF employers about a potential increase. The subcommittee decided to keep the asset methodology the same until the experience study has been completed (next year) and to decide if warning letters were still needed at that time.

Mr. Baud moved that the subcommittee accept the recommendations of the actuary as expressed in its October 28, 2011 "roll forward" and in turn recommend to the Retirement Commission that for fiscal year 2012-2013, the total contribution rate for PFSBF employers be the same except that New Britain would be required to contribute 0.87% of payroll. Unanimous decision.

3. Proposed GASB Changes

Ms. Cranna and Mr. Bonnano then discussed with the subcommittee the proposed GASB changes (the exposure drafts) and how the changes would impact the CMERS multi-employer system. The Buck actuaries explained how the proposed GASBs separates accounting from funding (resulting in two valuations), mandates individual entry age normal cost method, level percent of pay where CMERS currently uses entry age normal cost method (level dollar) and reduces the amortization periods. The changes would be effective July 1, 2013 for CMERS. The subcommittee had numerous questions for Buck on the status of the exposure drafts and the affect on CMERS including the additional expense relating to the additional work to be done by Buck. Mr. Bonanno replied that at this time he could not give the subcommittee an estimate of the cost of the additional work necessitated by the new GASBs. The subcommittee informed Buck that it wished the estimate cost as soon as possible.

4. Spousal Waiver - PADRO Issue

The subcommittee next addressed the issue of pension division orders (pursuant to a divorce) on a pension benefit particularly when a survivor option has been selected, the member has remarried prior to retirement and a spouse waiver is required. As the retirement plan at issue is a governmental defined benefit plan, the provisions of ERISA and the Retirement Equity Act do not apply - for example - segregated accounts are not maintained for the member and the alternate payee. Mr. Baus and Mr. Poulin proposed some suggestions to resolve the problem. They asked Ms. Kemp to send them information concerning the division orders received by the Division to determine a solution to the issue.

Ms. Cranna and Mr. Bonanno left the meeting to return to their office in New York.

5. MERS Budget

The subcommittee next reviewed the CMERS administration budget. Ms. Kemp had asked the Division Accountant, Ms. Reid, to prepare a 5 year overview of CMERS administrative costs and expenses. Ms. Kemp noted some of the older charges required further review and that such review might take several months. She noted that Ms. Halpin had instituted new procedures with regard to ordering, and the review and payment of invoices relative to MERS.

6. Administrative Fees

The administrative fees for CMERS and the PFSBF were next discussed by the subcommittee. With regard to personnel expenses and salaries, a staff member had left in June 2011 but that the position had been approved for refill which would increase this category for FY2012. Ms. Kemp noted that CMERS hoped to hire a financial person to perform certain payroll, collection and contribution functions but that this was not likely until 2013. She also noted that some IT service charges (CATER) had increased and Division were trying to determine the reason for the increase. The subcommittee asked questions which were answered by Ms. Kemp and Ms. Reid.

The subcommittee wanted additional information on the anticipated FY13 administrative fund surplus from Ms. Reid. Ms. Reid stated it would take some time to go to her office and get the information. Due to the time this would time, the lateness of the hour (after 5:00 p.m.) and the increasingly inclement weather, a motion was made by Mr. Baus, second by Mr. Poulin to recess and to reconvene the following day (November 17, 2011) at 10:30 a.m. to conclude the meeting. Unanimous decision.

The meeting of the actuarial subcommittee reconvened at approximately 10:30 a.m. on November 17, 2011. Trustees Baus, Casella, Cosgrove, Greatorex and Poulin were present. Ms. Yelmini was absent. Also in attendance was Ms. Kemp. Ms. Kemp distributed the requested information on the anticipated administrative fund surplus to the subcommittee members. Based upon the information provided, Mr. Baus moved to set the CMERS' administrative fee at $115 per employee/retiree and to set the PFSBF administrative fee at $50 per employee/retiree. Mr. Poulin second. Unanimous discussion. The meeting adjourned at 10:45 a.m.

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