Agenda - Council - 06/12/2018 - Laserfiche WebLink

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NOTE 8 — DEFINED BENEFIT PENSION PLANS — STATE-WIDE (CONTINUED) The following changes in actuarial assumptions occurred in 2017: 1. GERF: • The Combined Service Annuity (CSA) loads were changed from 0.8 percent for active members and 60 percent for vested and non -vested deferred members. The revised CSA loads are now 0.0 percent for active member liability, 15.0 percent for vested deferred member liability and 3.0 percent for non -vested deferred member liability. • The assumed post -retirement benefit increase rate was changed from 1.0 percent per year for all years to 1.0 percent per year through 2044 and 2.5 percent thereafter. 2. PEPFF: • Assumed salary increases were changed as recommended in the June 30, 2016 experience study. The net effect is proposed rates that average 0.34 percent lower than the previous rates. • Assumed rates of retirement were changed, resulting in fewer retirements. • The Combined Service Annuity (CSA) load was 30 percent for vested and non -vested deferred members. The CSA has been changed to 33 percent for vested members and 2 percent for non - vested members. • The base mortality table for healthy annuitants was changed from the RP-2000 fully generational table to the RP-2014 fully generational table (with a base year of 2006), with male rates adjusted by a factor of 0.96. The mortality improvement scale was changed from Scale AA to Scale MP-2016. The base mortality table for disabled annuitants was changed from the RP-2000 disabled mortality table to the mortality tables assumed for healthy retirees. • Assumed termination rates were decreased to 3.0 percent for the first three years of service. Rates beyond the select period of three years were adjusted, resulting in more expected terminations overall. • Assumed percentage of married female members was decreased from 65 percent to 60 percent. • Assumed age difference was changed from separate assumptions for male members (wives assumed to be three years younger) and female members (husbands assumed to be four years older) to the assumption that males are two years older than females. • The assumed percentage of female members electing Joint and Survivor annuities increased. • The assumed post -retirement benefit increase rate was changed from 1.00 percent for all years to 1.00 percent through year 2064 and 2.50 percent thereafter. • The single discount rate changed from 5.60 percent to 7.50 percent. The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness of the long-term expected rate of return on a regular basis using a building-block method in which best -estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Long -Term Expected Real Rate Asset Class Target Allocation of Return Domestic Stocks 39% 5.10% International Stocks 19% 5.30% Bonds 20% 0.75% Alternative Assets 20% 5.90% Cash 2% 0.00% Total 100% 86