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OPEN – C&HR – INFO 1-1OPEN – C&HR – INFO 1-1
UM Retirement PlanAnnual Valuation
Board of CuratorsJanuary 31, 2013
OPEN – C&HR – INFO 1-2
UM’s Two Core Retirement Plans
Employee Retirement Investment (new) Plan
Retirement, Disability and Death Benefit Plan
Defined Benefit Portion
Multiplier Formula 1.0% of pay 2.2% of pay
UM Contribution 3.20% of salary 7.25% of salaryVesting 5 years 5 years
Employee Mandatory Contribution
1% up to $50,000,
2% of amount above $50,000
1% up to $50,000,
2% of amount above $50,000Defined Contribution Portion
UM Automatic Contribution
2% of pay
UM Match 100% up to an additional 3% of pay
Vesting 3 years (need not be consecutive)
Estimated UM Contribution
7.4 to 7.7% of Pay 7.25%
OPEN – C&HR – INFO 1-3
Funding Approach
Funding for both defined benefit plans (pre and post October 2012) is held in the same trust− Annual UM contributions are blended− Employees contribute the same amount to the
defined benefit portionValuation as of October 1, 2012
− No members in new plan for this valuation− However, since the valuation predicts funding for
FY14, the contribution includes a projection based on previous hires
OPEN – C&HR – INFO 1-5
Annual Valuation Summary
Determine the annual contribution required to meet funding obligations
FY14 funding contribution is slightly less than originally predicted
Highest annual contribution in history of plan, due to extreme market downturn in 2008 and 2009
Note: Full report available on the UM benefits website
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OPEN – C&HR – INFO 1-6
Actuarial Valuation Report
Howard Rog, Actuary, Segal Consultants
Annual valuation includes:− Present provisions of the plan− Characteristics of active, inactive and retired members− Actuarial assumptions and methods− Actuarial value of the Plan’s Trust assets
Determination of annual contribution
OPEN – C&HR – INFO 1-7
Characteristics of Active Members
Element 2011 2012
Academic and Administrative
Number 11,148 11,101
Average age 46.1 46.3
Average years of service 10.7 11.0
Average annual salary $71,541 $73,141
Clerical and Service
Number 7,279 7,098
Average age 44.5 44.8
Average years of service 9.9 10.1
Average annual salary $32,195 $32,986
OPEN – C&HR – INFO 1-8
Characteristics of Retired Members
Academic and Administrative
Clerical and Service
Number of retirees 4,103 2,621
Average age at retirement 63.5 62.3
Monthly benefits range from less than $100 to more than $5,000
48 retirees are age 95 or older
551 pensions began in 2012
OPEN – C&HR – INFO 1-9
Actuarial Valuation Report Assumptions
Assumptions (reviewed every 5 years): Investment ReturnActuarial Funding MethodAsset Valuation MethodSalary and Payroll Increases Retirement RatesMortality RatesWithdrawal RatesDisability RatesPresence and Age of Spouse
OPEN – C&HR – INFO 1-10
Development of Actuarial Value of Assets
Calculation of Unrecognized Return
Original Amount
Unrecognized Return
Year ended September 30, 2012 $141,201,927 $112,961,541
Year ended September 30, 2011 ($152,060,512) ($91,236,307)
Year ended September 30, 2010 $31,521,057 $12,608,423
Year ended September 30, 2009 ($183,169,581) ($36,633,916)
Year ended September 30, 2008 ($742,138,877) 0
Total Unrecognized Return ($2,300,259)
OPEN – C&HR – INFO 1-11
Changes Impacting Plan Contribution Requirements
Dollar Amounts
Percent of Payroll
Total cost as of October 1, 2011 $104,711,588 10.15%
Changes due to:
Change due to increased payroll $1,021,181 (0.04%)
Demographic changes ($188,141) (0.02%)
Loss/(gain) from actuarial experience and contributions
$20,529,665 1.96%
Total changes $21,362,705 1.90%
Total cost as of October 1, 2012 $126,074,293 12.05%
OPEN – C&HR – INFO 1-12
Determination of FY 14 DB Annual Contribution
Contribution Requirements % of Pay
Normal cost 6.75%
Total costs 11.62%
Employee contribution -1.27%Net employer DB contribution 10.35%
Note: Includes DB funding for both pre and post October 2012 members
OPEN – C&HR – INFO 1-14
Total Cost Projections for all Retirement Plans
(Defined Benefit and Defined Contribution)
OPEN – C&HR – INFO 1-15
FY14 Total Retirement Plan Costs
Contribution Requirements % of Pay
Total Defined Benefit (DB) costs 11.62%
Employee Contribution to DB -1.27%
Net Employer Contribution to DB 10.35%
Projected Employer Contribution to DC .47%
Total Employer Contribution to Plans* 10.82%*Estimated FY14 Employer Contribution = $119.2 million
OPEN – C&HR – INFO 1-16
Projected Use of Stabilization Fund
FY12 FY13 FY14 FY15 FY16 FY17
Gross Required Contribution 8.39% 10.16% 12.09% 12.30% 12.08% 11.96%
Projected Employee Contribution -1.23% -1.26% -1.27% -1.28% -1.29% -1.30%
Net Required Employer Contribution 7.16% 8.90% 10.82% 11.02% 10.79% 10.66%
Flat Rate – Retirement % 7.25% 8.25% 9.00% 9.75% 10.50% 11.25%
Excess (deficiency) of Flat Rate to Net Required Employer Contribution
0.09% -0.65% -1.82% -1.27% -.29% .59%
Stabilization Fund, Ending Balance (millions)
$ 67.6 $ 61.6 $ 42.2 $ 28.8 $ 26.1 $33.3