Retirement Services Division State Employees Retirement Commission's Actuarial Subcommittee May 19, 2010 Minutes


May 19, 2010

Robert Baus
Charles Casella
Claude Poulin
Steve Greatorex
Richard Cosgrove

Mark Ojakian, Deputy Comptroller and Acting Director, Retirement Services Division
Jeanne Kopek, Assistant Director, Retirement Services Division
Tom Cavanaugh, Cavanaugh Macdonald Consulting, LLC
John Garrett, Cavanaugh Macdonald Consulting, LLC
Ed Koebel, Cavanaugh Macdonald Consulting, LLC

The meeting began at about 2:00 p.m. Tom Cavanaugh, John Garrett and Ed Koebel appeared to present the draft results of the December 31, 2009 Probate Judges and Employees Retirement System (PJERS) actuarial valuation.

Ed began by discussing the transition from the Commission's former actuarial firm, Milliman USA. Using data provided by that firm, Cavanaugh Macdonald Consulting, LLC (CavMac) reproduced the December 31, 2008 valuation and matched the results of Milliman's valuation within 1.25%. CavMac results reflected a slightly lower unfunded actuarial accrued liability but exactly matched the normal cost. The slight difference can be attributed to differences in computer systems and processing methods.

Ed went on to discuss the results of the December 31, 2009 valuation. The payroll data reflected an increase of 4.9% which is right on target with the assumed increase of 5%; there was a 4.1% increase including cost of living adjustments in benefit payments. There was an increase of 3% in the actuarial accrued liability and for 2009 the normal cost is 10.88% of payroll.

Tom reviewed the market and actuarial values of the system assets. He explained that the results of the actuarial value of assets were developed using a different method or approach from that used by the previous actuarial firm. He went on to explain the two approaches they recommended: AVA in which the amount of investment income is recognized immediately based on the actuarial value of the assets and the MVA in which the amount of investment income is recognized immediately based on the market value of the assets. He also recommended that smoothing be done over five years rather than the longer period previously used. He advised that these methods result in a smaller asset value and are more in line with actuarial standards. He further advised that he would be suggesting these changes for the State Employees Retirement System (SERS) valuation.

After discussion Bob Baus moved seconded by Linda Yelmini that the AVA method be used with the last five years numbers until the next experience study is performed and the results reviewed. CavMac will provide updated numbers to subcommittee members before completing final report. All members were in favor of the motion.

John explained the unfunded actuarial accrued liability (UAAL) results. This year's numbers reflect a 19 year amortization period. Some of the difference in the UAAL can be attributed to differences in computer systems and processing methods. And will be minimal in the future. Based on the UAAL the system funding ratio has increased resulting in no annual required contributions for the valuation period.

The Subcommittee discussed the work CavMac is performing for the Office of Policy and Management on SERS. The trustees requested that copies of the information provided to OPM in response to their request be provided to the subcommittee members.

The meeting adjourned at about 4:00 p.m.

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