4 6pres vrs

transcript

Prince William County GovernmentPrince William County Government

Virginia Retirement System Contributions

Christopher E. Martino, Finance Director

Mr. Bryan Avant, ASA, EA

Bolton Partners, Inc.

2Date: 04/13/23

Agenda for 4/6/04

Brief Background Information on VRS and PWC participation

Employer Contribution Rate Prior Contribution Rates Pension Plan Terminology Current Contribution Rate Future Contribution Rates

Summary of Meeting with VRS on 3/26/04

Recommendations

3Date: 04/13/23

PWC has participated in VRS since 1962

A Board of Trustees oversees VRS Fiduciary responsibility Not elected officials

Employer participation is irrevocable (sec. 51.1-139) There are 405 participating political subdivisions

4Date: 04/13/23

PWC has participated in VRS since 1962

PWC has 4,894 participants as of 6/30/03 consisting of employees with PWC former employees separated from PWC that are still earning benefits in

VRS Former employees that are not earning benefits in VRS and are vested,

and those that are not Retirees from PWC receiving benefits Retirees from other employers that were with PWC at one time, now

receiving benefits

5Date: 04/13/23

PWC contributions consists of:

Employer’s Contribution Rate this is a percent determined at least every 2 years by VRS based on

actuarial information for PWC

Employee’s Share of 5% of salary, that PWC as an employer pays for its employees

Health Insurance Credit of 0.12%, and changes insignificantly

6Date: 04/13/23

PWC Contribution Rate History

PWC Employer Contribution %

10.00%

12.00%

14.00%

16.00%

Jul-1994

Jul-1995

Jul-1996

Jul-1997

Jul-1998

Jul-1999

Jul-2000

Jul-2001

Jul-2002

Jul-2003

Jul-2004

Jul-2005

Employee 5%Share+EmployerContribution

7Date: 04/13/23

ACTUARIAL PRESENT VALUE is the amount that would have to be invested so that the invested amount + investment earnings would provide funding for Total Projected Benefits or benefits based on current service. PWC’s normal cost is currently approximately 12% of “covered” payroll,

which covers benefits based on current service.

8Date: 04/13/23

Actuarial Assumptions

Assumptions are used to value Actuarial Present Value and the liabilities of the plan

The assumptions used by VRS for PWC: 3% cost-of-living adjustments for retirees Pay raises from 4% to 6.1% (COLA+Merit) 8% market rate of return

9Date: 04/13/23

Actuarial Value of Assets vs. Market Value of Assets

PWC As of June 30, 2000 Valuation:

Market Value 393,409,421$ Actuarial Value 350,252,408 Deferred Gains 43,157,013$

10Date: 04/13/23

The sum of all costs based on service prior to the current year, or valuation date + any interest accrued on those costs =

ACTUARIAL ACCRUED LIABILITY

− Actuarial Value of Assets

= UNFUNDED ACTUARIAL ACCRUED LIABILITY or UAAL

11Date: 04/13/23

Plan Value on June 30, 2000

Actuarial Accrued Liability 297,709,457$ Actuarial Value of Assets 350,252,408 Unfunded AAL (52,542,951)$

12Date: 04/13/23

PWC Contribution Rate History

10.00%

12.00%

14.00%

16.00%

Jul-1994

Jul-1995

Jul-1996

Jul-1997

Jul-1998

Jul-1999

Jul-2000

Jul-2001

Jul-2002

Jul-2003

Jul-2004

Jul-2005

13Date: 04/13/23

If Market Performance was amortized over a longer term

10.00%

12.00%

14.00%

16.00%

Jul-1994

Jul-1995

Jul-1996

Jul-1997

Jul-1998

Jul-1999

Jul-2000

Jul-2001

Jul-2002

Jul-2003

Jul-2004

Jul-2005

if 30yr amortizationwas used

14Date: 04/13/23

Asset Value on June 30, 2003

PWC’s Unfunded Accrued Actuarial Liability is currently $9,967,281 requiring funding during amortization period through Contributions Market outperforming assumptions

Market Value 350,968,375$ Actuarial Value 418,599,981 Deferred Losses (67,631,606)$

15Date: 04/13/23

PWC contribution rate today

10.00%

12.00%

14.00%

16.00%

Jul-1994

Jul-1995

Jul-1996

Jul-1997

Jul-1998

Jul-1999

Jul-2000

Jul-2001

Jul-2002

Jul-2003

Jul-2004

Jul-2005

16Date: 04/13/23

PWC contribution rate in the future

10.00%

12.00%

14.00%

16.00%

Jul-1994

Jul-1995

Jul-1996

Jul-1997

Jul-1998

Jul-1999

Jul-2000

Jul-2001

Jul-2002

Jul-2003

Jul-2004

Jul-2005

Jul-2006

Jul-2007

17Date: 04/13/23

PWC contribution rate in the future

10.00%

12.00%

14.00%

16.00%

Jul-1994

Jul-1995

Jul-1996

Jul-1997

Jul-1998

Jul-1999

Jul-2000

Jul-2001

Jul-2002

Jul-2003

Jul-2004

Jul-2005

Jul-2006

Jul-2007

PWC Staff Met with VRS

On 3/26/04

19Date: 04/13/23

VRS Actuarial Methods

The same VRS actuarial methods are used for every participating political subdivision and the Commonwealth

Participants’ contribution rates are not set based on Commonwealth budgets but rather they are based on the actuarial assumptions and the employer-specific asset and liability data

20Date: 04/13/23

Employer Contributions

Localities participating in VRS must pay the contribution determined as a result of actuarial studies

There are statutory penalties for failure to make the required contributions

Participation is irrevocable and the employers’ share for the employee is irrevocable

21Date: 04/13/23

Employer Contributions

The Commonwealth has not contributed the employer’s share

22Date: 04/13/23

VRS Actuarial Methods

Banding was implemented prior to significant market swings up and down as a way to limit fluctuation in employer contribution rates

That is not the result given the subsequent market performance Market performance was not forecasted by VRS or its actuary

23Date: 04/13/23

Recommendations: More Meaningful Summaries and Projections from VRS

VRS Actuary interpret and explain key issues as they arise

VRS Actuary explain the impact on the future of this current valuation in budgeting terms

Actuary to provide a 5-year forecast for PWC utilizing assumptions and estimates

24Date: 04/13/23

Recommendations for Staff

Contract with an actuary to review actuarial reports from VRS and use actuarial methods to provide 5-year projections

Staff to recommend funding strategies within the County’s 5-year budget plan to stabilize the County’s contribution rate Smooth out fluctuations in the rate and the impacts on the 5-year plan Make prepayments to VRS to cushion our contribution rate

Incorporate in Principles of Sound Financial Management policies regarding funding of VRS

Virginia Retirement System Contributions

Questions/Comments/Discussion

4 6pres vrs

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