STATE PENSION REVIEW BOARD OF TEXAS ACTUARIAL … · 2016. 9. 9. · Thursday, September 15, 2016...

STATE PENSION REVIEW BOARD OF TEXAS

ACTUARIAL COMMITTEE MEETING

AGENDA

Thursday, September 15, 2016 – 10:00 AM Location: Employees Retirement System of Texas

Board Room 200 East 18th Street, Austin, Texas 78701

The Actuarial Committee may deliberate and take action on any of the following items:

1. Meeting called to order

2. Roll call of Committee members

3. TAB 1 Approval of the July 14, 2016 Committee meeting minutes

4. TAB 2 Review and consider modifications to the PRB Guidelines for Actuarial Soundness, including presentation of comments received on the PRB Guidelines survey

5. TAB 3 Review and consider modifications to the PRB Actuarial Valuation Report, including possible changes to PRB reported amortization periods for certain public retirement systems

6. Invitation for audience participation

7. Adjournment

NOTE: Persons with disabilities who plan to attend this meeting and who may need special assistance are requested to contact Ms. Sheryl Perry at (800) 213-9425/ (512) 463-1736 three to five (3-5) working days prior to the meeting date so that appropriate arrangements can be made.

TAB 1

Pension Review Board Actuarial Committee Meeting

Minutes July 14, 2016

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1. Meeting called to order

The second meeting of 2016 of the State Pension Review Board (PRB) Actuarial Committee was called to order by Chair Bob May on Thursday, July 14, 2016, at 1:38 p.m. at 300 West 15th Street, Room 103, in Austin, Texas.

2. Roll call of Committee members

Board Members Present: Robert M. May Keith W. Brainard Josh McGee

3. Approval of the June 20, 2016 Committee minutes – Chair May

Chair May entertained a motion to suspend the reading of the minutes of the PRB Actuarial Committee meeting held June 20, 2016 and to approve them as amended.

Motion made by Mr. Keith Brainard, seconded by Mr. Josh McGee.

MOTION CARRIED UNANIMOUSLY

4. Review and consider modifications to the Actuarial Valuation report, including discussion of

amortization periods, GASB 67 data, actuarial assumptions, asset allocations and contribution rates for public retirement systems – Chair May A. Staff update on the Actuarial Valuation Report, including reporting of amortization periods,

GASB 67 data, actuarial assumptions, asset allocations, and contribution rates for public retirement systems – Kenny Herbold

Mr. Herbold provided a brief description of the proposed changes to the Actuarial Valuation Report and information on the Contribution Report.

Mr. Herbold stated that three versions of the Actuarial Valuation Report were provided for the Committee’s consideration. Mr. Herbold explained that Version 1A removed Plan Status, Prior Actuarial Value of Assets (AVA) and Prior Unfunded Actuarial Accrued Liability (UAAL); and added Market Value of Assets (MVA) and explained the definition of UAAL, as UAAL = AAL-AVA.

Mr. Herbold noted that Version 1B of the Actuarial Valuation Report was essentially the same as Version 1A, but also included UAAL as % of Payroll from the Supplemental to primary report.

Mr. Herbold explained that Version 2 was an alternative approach to add Discount Rate, and UAAL as % of Payroll to the Current Actuarial Valuation. Version 2 would remove AVA and UAAL from the Prior Actuarial Valuation columns. Mr. Herbold also explained that Version 2 of the Supplemental Report would include primarily GASB 67 reporting information including, GASB 67 Reporting Date, Discount Rate, Total Pension Liability (TPL), Fiduciary Net Position, NPL, NPL Funded Ratio, NPL -1%, NPL -1% Funded Ration and 1 year money-weighted rate of return.

The Committee agreed upon Version 2 of the Actuarial and Supplemental Reports and to include a 10 year return for the NPL.

Mr. Herbold presented two drafts of the Contribution Report to include employer and employee contributions. The Committee agreed upon Version 2 of the Contribution Report.

Mr. McGee noted that he is still in favor of considering doing something with a common discount rate potentially for plans to see what that would mean for the liabilities and unfunded liability.



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Mr. McGee stated that he would like to hear other Committee member’s thoughts on the value of a column on the supplemental report.

After a brief discussion, the Committee agreed to have staff seek advice of the AG counsel to determine if the PRB would be within statutory guidelines and not stepping into a fiduciary role.

Mr. Brainard recommended an alternative of grouping the funds based on real rate of return or some way so plan sponsors who wish to know can see that they are on the riskier side of the group and they can make their own inference.

Mr. McGee agreed on coming up with some way of grouping the funds based on nominal rates of return and requested staff to work on suggestions to present at the next meeting.

Committee members agreed on having staff work on suggestions for grouping the funds and will not consult with AG Counsel at this time.

Mr. Herbold provided a brief background of the report on amortization periods.

Chair May recommended postponing action on amortization periods until the September 15th Committee meeting.

After a brief discussion, the Committee agreed on directing staff to gather more information on amortization periods.

Mr. Brainard made a motion to postpone the amortization discussion until the September 15, 2016 Actuarial Committee Meeting.

Motion made by Mr. Brainard and seconded by Chair May to postpone the amortization discussion until the September 15, 2106 Actuarial Committee Meeting.

Chair May stated that all aspects for amortization for all plans would be discussed at the September 15, 2016 meeting.

Ms. Anumeha recommended that staff can use this as an opportunity to make sure the PRB has a consistent policy in place for its effective amortization period methodology, as well as review systems that fall under the specific category of rolling amortization method.

Mr. McGee clarified that at the next meeting he would like to have a discussion of PRB’s reporting of rolling amortization periods in its AV Report and not the amortization policies.

Ms. Anumeha stated that staff would work with the Board Actuary to come back with a more thorough analysis which would reflect the current plans for which staff is calculating an effective amortization period for, including for the systems that are using a rolling method.

Mr. McGee confirmed that the Committee agreed to adopt Version 2 of the Actuarial Valuation, Supplemental and Contribution Reports.

B. Receive Public Comments (39:00)

Mr. Max Patterson, TEXPERS, stated that regarding the investment and assumption rates, the PRB has not gotten into trying to regulate what funds should do other than in the area of training. He stated that he strongly suspects that the Legislature would not want to get into the position of sharing the investment risks of the different boards and the liability for the funds. Once the state gets into investment returns, it blurs the line. Mr. Patterson stated that he would suggest that the PRB put emphasis on training.

Ms. Jennifer Jones, Employees Retirement System recommended the committee to consider identifying fixed rate vs ADC plans.



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Mr. Brainard asked Ms. Jones if she would suggest adding a column indicating indication whether plans have a fixed rate or variable contributions. Ms. Jones indicated yes.

Mr. McGee agreed with Ms. Jones recommending a column at the end of the Contribution Report labeled: fixed, actuarial or other. Chair May and Mr. Brainard agreed with Mr. McGee’s suggestion.

5. Review and consider modifications of the PRB Guidelines for Actuarial Soundness– Chair May

A. Staff update on the PRB Guidelines for Actuarial Soundness (45:09)

Ms. Anumeha provided a brief description of staff’s preliminary research on the funding standards of other states. Ms. Anumeha stated that staff would continue their research for a more thorough analysis to be presented at the August 4, 2016 Board meeting.

Mr. Herbold asked the Committee if there was particular information that they were looking for or would help them in guiding them to make changes to the Guidelines for Actuarial Soundness.

Chair May stated that staff should look at the similarities and differences of the PRB and other states.

Mr. McGee stated that the PRB should look at the key elements previously discussed and determine if other states have guidelines around those key elements. He stated that the PRB doesn’t have enforcement authority, but some states have guidelines and enforcement of insufficient contribution levels because of elements in the funding policy. Understanding the extent to which those exist and what those enforcement mechanisms are, would be useful.

Mr. Brainard recommended reviewing Tennessee’s, Illinois’ and Massachusetts’ standards for pension plans.

Mr. Brainard stated that ideal or optimal or recommended funding standards are what staff should be looking for.

Ms. Anumeha stated that staff would group the information as far as minimum funding standards, compare it against our guidelines as well as research recommended standards and provide it to the Committee in September.

Mr. Herbold provided a brief explanation of negative amortization.

Mr. Brainard stated that amortization and negative amortization should be discussed within our funding guidelines. The heart of the matter is transparency and disclosure so that trustees understand when they are engaging in negative amortization. Whether or not they choose to do it is their decision, but we ought to be making sure that they understand when it is occurring. Mr. Brainard recommended that the PRB should address this as part of its funding guidelines.

Mr. Herbold provided background information for the Actuarial Soundness Survey sample questions.

Ms. Anumeha stated that retirement system plan administrators and their plan actuaries would receive the survey.

Mr. Brainard stated that we should be specific in the survey questions and use the following language “appropriate target range and/or suggested maximum boundary.”

Mr. Brainard agreed to present the survey questions as bullet points to inform the reader that these are industry recommendations and practices and then get feedback on what they believe is an appropriate amortization period. Mr. McGee stated that he thinks that would be a great approach and Chair May agreed.



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The Committee agreed to include negative amortization input from systems and provide a brief explanation of negative amortization.

Mr. Brainard recommended the survey questions to be as open ended as possible to encourage people to elaborate.

Ms. Anumeha noted that staff can have the survey completed and sent out to systems before the August 4th Board Meeting or present changes to the survey at the August 4th Board Meeting for the Board to review and finalize before submission to systems.

After a brief discussion on a timeline for survey submission, Ms. Anumeha will consult with the Attorney General Counsel to see if the Committee can approve the survey by email. Mr. McGee recommended if the Committee is unable to approve by email, staff will include it in the Actuarial section of the August 4th Board Meeting with the full board to recommend that it be sent out at that meeting.

B. Receive Public Comments (1:36:30) Mr. Chris Bucknall, Texas County and District Retirement System, commented on negative amortization and layered amortization. Chair May requested Mr. Bucknall to put his comment in writing on the survey for consideration. Mr. Bucknall agreed. Mr. David Stacy, Midland Firemen’s Relief and Retirement Fund, requested clarification on the Actuarial Experience Study mentioned in the survey. Mr. Stacy noted that there could be a cost burden to some plans relative to assets or size of the plan. Mr. Stacy requested clarification on what qualifies as an actuarial experience study. Mr. Brainard stated point well taken and PRB may need to be more specific about what is meant. Chair May stated that the system’s actuaries would need to explain what they do for a thorough actuarial analysis; hopefully the survey will provide some input.

6. Review and consider a rating system for pension plan fiscal health and annual funding adequacy – Chair May (1:43:35)

A. Staff update on the rating system for pension plan fiscal health and annual funding adequacy

Ms. Anumeha provided a brief description of different industry and state rating systems researched by the PRB staff.

Chair May noted that he would include two elements: funding ratio and amortization period.

Mr. McGee stated that simplicity is important in the presentation of the rating. He recommended defining what is being rated, which is the current fiscal health and funding sufficiency of the plan. He also noted that studies have proven that a rating system has significant impact on people’s behavior.

Mr. Brainard stated that he has submitted to staff a document titled the PRB Factors and the three elements he would suggest including are: funding ratio, actuarially determined contribution rate and UAL as % of payroll.

Mr. McGee stated that staff should consider how these different elements could be scaled relative to each other.

The Committee directed staff to take the five measures (funded ratio, actual contribution as a percentage of ADC, unfunded as a percentage of payroll and amortization period and ADC or AAL



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as a percentage of payroll) and look at the options of putting together an A – F scale for the next Actuarial Committee meeting.

B. Receive Public Comments (2:03:40) Mr. Chris Bucknall, Texas County and District Retirement System, commented that with regards to actuarially determined contribution as part of the scoring method, social security vs. no social security of employers should be included for a more holistic picture. Mr. McGee stated that this is one element that could be included and this is one that we will need to be more careful about than the other elements. Mr. Max Patterson, TEXPERS, stated that trying to attach an agency grade to a pension system is a grave mistake; it leaves the reader to apply their own definition to what that means. If a system is having a problem it’s far more beneficial to state it in the narrative. Mr. McGee stated that the fundamental difficulty is bad terminology and bad communications in the past. We are trying to capture the fiscal health of the pension plan not the job the plan is doing. The express purpose of the rating system would be to get the employers/plan sponsors to fundamentally pay attention and address the problems and take more responsibility. Ms. Anumeha stated that staff would consult with Attorney General Counsel to make sure there are no potential legal impediments in creating a rating system. Mr. Brainard stated that anything done should be accompanied by a qualitative assessment from the staff. More often than not when a plan is in distress the source of that distress is the plan sponsor either through inadequate funding usually or poor plan design. He further stated that the qualitative assessment can and should inform the readers of those facts. Mr. Patterson stated that he agrees with Mr. Brainard, but without putting a letter grade to it. Mr. Brainard noted that a letter grade has not been settled on and what he proposed was just a factor or a number that in and of itself wouldn’t mean anything. Mr. Brainard further stated that we are the Pension Review Board and our job is to review and this is one way, a tool in our tool box potentially that would inform us and members of the public as to the overall condition of these plans. Jim Smith, San Antonio Fire and Police Pension Fund, stated that he agrees with Max on the stigma of a letter grade. The objective is the correct objective, but the letter grade creates a bad stigma. Mr. McGee commented that he understands a lot of pressure has been put on plans, but academic research has shown that ratings can lead to improvements. Ms. Jennifer Jones, Employees Retirement System, mentioned it might be helpful to survey systems and their actuaries to solicit comments on what would be the most helpful metrics for their plan. Mr. McGee stated that the Committee should look at that at the next meeting once we have a little more information. Jim Smith, San Antonio Fire and Police Pension Fund, stated that people are self-correcting in Texas and taking care of business.



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7. Date and location of next Committee Meeting – Chair May

The next two committee meetings of the Actuarial Committee will be held on September 15, 2016 and October 13, 2016 at 1:30 p.m.

8. Invitation for audience participation – Chair May

No public comment.

9. Adjournment

Mr. May thanked the Committee and the audience for their participation at the meeting. With the business of the Committee completed, Chair May adjourned the meeting at 4:15 p.m. In Attendance: Staff Anumeha Jamie Kings Wes Allen Michelle Kranes Bryan Burnham Shelley Murphy Eloisa Mata Sheryl Perry Kenny Herbold Guests

D. Rivera, Austin Retired Teachers Association Tom Rogers, Austin Retired Teachers Association Leslee S. Hardy, Texas Municipal Retirement System Andrew Clark, Speaker’s Office Jennifer Jones, Employees Retirement System of Texas Chris Bucknall, Texas County and District Retirement System Michael Trainer, San Antonio Fire and Police Pensioners Association Mark Harkrider, Austin Police Retirement System Eddie Solis, Texas Association of Public Employee Retirement Systems Jim Smith, SAFPPF/Texas Association of Public Employee Retirement Systems John Lawson, Houston Police Officers’ Pension System Hope Osborn, Texas Retired Teachers Association Glenn Deshields, Texas State Association of Fire Fighters Joe Gimenez, Texas Association of Public Employee Retirement Systems Steve Waas, Houston Municipal Employees Pension System Max Patterson, Texas Association of Public Employee Retirement Systems David Stacy, Midland Firemen’s Relief and Retirement Fund

Chair Robert M. May

TAB 2

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PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting

September 15, 2016

The Pension Review Board (PRB) sent a survey on August 9, 2016, with a reminder on August 24, 2016,

to public retirement systems and their actuaries to solicit comments on certain topics to assist the PRB

in its review and update of the Guidelines for Actuarial Soundness. A link to the survey was also posted

on the homepage of the PRB's website. The deadline for completing the survey was September 2, 2016.

The survey contained eleven questions with the option to provide additional comments at the

conclusion, and respondents could also upload documents. The questions were on the following topics:

Amortization Period

Discount Rate

Asset Smoothing

Actuarial Experience Studies

Actuarial Cost Methods

General (change of the nomenclature of the PRB Guidelines, funding responsibility of the

associated governmental entity, actuarially determined contribution rate versus annual fixed

rate, the different needs of mature plans)

The PRB received 18 responses from funds, their actuaries, and other interested parties. The responses

are summarized in the Executive Summary section below. Actual comments from respondents are also

included in the following pages and are organized by survey question.

Current PRB Guidelines for Actuarial Soundness (Adopted September 28, 2011)

1. The funding of a pension plan should reflect all plan obligations and assets.

2. The allocation of the normal cost portion of the contributions should be level or declining as a

percent of payroll over all generations of taxpayers, and should be calculated under applicable

actuarial standards.

3. Funding of the unfunded actuarial accrued liability should be level or declining as a percent of

payroll over the amortization period.

4. Funding should be adequate to amortize the unfunded actuarial accrued liability over a period

not to exceed 40 years, with 15 - 25 years being a more preferable target. Benefit increases

should not be adopted if all plan changes being considered cause a material increase in the

amortization period and if the resulting amortization period exceeds 25 years.

5. The choice of assumptions should be reasonable, and should comply with applicable actuarial

standards.

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016

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Executive Summary

Below is a summary of responses the PRB received, organized by topic.

Amortization Period

Maximum Amortization Period

Keep current Guidelines for maximum amortization period: 5

Lower maximum boundary for amortization period; suggestions ranged from 20-35 years: 9

No recommendation: 1

Target Range for Amortization Period

Keep current Guidelines for target range: 8

Narrow the target range; 10-15 or 15-20 years: 5

No recommendation: 2

Maximum and Target Range

PRB should adopt a policy that reflects the CCA's Guidance to the greatest degree.

There should be no guideline in this area.

Additional Comments Received:

Another suggested policy (in addition to ASOPs and CCA White Paper) from the PRB is

redundant and not useful.

Closed amortization period is preferable to open.

PRB should consider the importance of intergenerational equity when establishing the

maximum period.

Benefit improvements should be allowed to anything below 20-22 years, and increased if the

amortization period does not rise above 20-22 years.

Discount Rate

Would not like the PRB to include guidance because ASOP 27 is sufficient: 7

Would not like the PRB to include guidelines on discount rate: 3

Current guidelines are sufficient: 2

If included, should be consistent with ASOP 27: 1

Target of 4%-6%: 1

No suggestion: 2


The PRB is not involved in investing and its expertise lies in other areas, so it is not appropriate

for the Guidelines to comment on discount rate or asset allocation.

It is impossible to provide a one-size-fits-all range or maximum given the wide array of

investment portfolios within Texas public retirement systems.


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PRB should recommend that the process used in developing the assumption be forward-looking.

The PRB could suggest periodic independent actuarial peer reviews.

The PRB could require the actuary, fund, and investment consultants (if any) represent that they

believe the rate is reasonable. If the rate is an outlier, the PRB can require the fund to disclose

why they determined the rate to be reasonable.

Asset Smoothing

Smoothing Periods

Would not like the PRB to include guidance because ASOPs are sufficient: 6

Suggested maximum asset smoothing of 5 years: 4

Smoothing period should depend on the corridor (CCA White Paper): 3

Suggested target for asset smoothing of 5-15 years: 1

If included, should be consistent with ASOPs: 1

If included, should be consistent with GFOA: 1

Should not be a specific recommendation (do not change current Guidelines): 1


Reducing the differences associated with actuarial smoothing period would simplify

comparisons.

The PRB and others should focus more on market value funding level rather than actuarial.

Smoothing Corridors

Unnecessary to address, since included in ASOP 44: 6

If included, should be consistent with ASOP 44: 1

If included, should be consistent with CCA White Paper: 3

Suggested a target range (80%/120%; 90%/110%; 5-year smoothing: 50%/150%, 15-year

smoothing: 80%/120%): 3

Should not be a specific recommendation (do not change current Guidelines): 1

No suggestion: 2


Pensions should not be measured on a yearly basis.

TRS does not use a corridor because our actuary's simulations show that it is unnecessary and

increases volatility.

Actuarial Experience Studies

Advantages to including a requirement for all plans regardless of assets

Accuracy.

Conducting a study more often helps a plan to identify and respond more rapidly, if appropriate,

when experience does not match the assumptions met.


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Disadvantages to including a requirement for all plans regardless of assets

Expense

The cost of the experience study lowers the fund's net rate of return, which lowers the rate at

which the amortization period decreases.

Scope of the Experience Study

State law does not define what should be in an actuarial experience study, which is appropriate

because all plans are unique.

Actuaries already attest to the reasonableness of the actuarial assumptions in each actuarial

valuation report.

The scope of actuarial experience studies should be left to the actuary to decide.

An experience study should review all economic and demographic assumptions used in the

valuation compared to the actual experience and make recommendations for adjustments

based on the five-year actual experience and/or the expected future experience if appropriate.


Large plans are already required to complete actuarial experience studies.

Experience studies should be completed on an as-needed basis.

State statute established a requirement for plans with assets over $100 million; the Guidelines

should avoid including any requirement that is not consistent with the law.

Actuarial Cost Methods

Additional Guidance Regarding Cost Methods

Keep current Guideline as is: 11

No comment/suggestion: 2

An appropriate cost method should produce a normal cost that is not expected to increase over

a member's career: 1

Cost method depends on the plan design: 1

If expanded, follow ASOPs and GASB: 1

There should not be a guideline regarding this topic: 1

Appropriate Cost Methods

I do not remember seeing a plan with an inappropriate cost method

There is a wide variety of actuarial cost methods and many of them do have merit in certain

circumstances

It would be difficult for the PRB to provide guidance that allows for the flexibility needed to

address the different situations.


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The PRB consider adding "and methods" to Guideline 5 to read "The choice of assumptions and

methods should be reasonable and should comply with applicable actuarial standards."

The PRB may want to maintain a list of known cost methods that always meet or do not meet

the requirements of item 2 of the current Guidelines.

General

Nomenclature

Suggested change of Guidelines nomenclature: 6

No suggestion provided: 5

Keep current nomenclature: 4

No comment/opinion on topic: 2


"Actuarial soundness" is no longer a preferred phrase among most actuaries. PRB should

consider changing the title because of this.

Funding Responsibility of the Associated Governmental Entity

Funding should be joint and proportional.

A guideline in this area would clarify roles and responsibilities.

Total contributions should be considered rather than solely one party or the other.

The PRB should not reference the funding responsibility of the plan's associated governmental

entity within the Guidelines.


The Guidelines should include that the plan sponsor acknowledge in writing each year whether

contributions are met, and also provide explanation.

The PRB should add an additional guideline to "establish an adequate funding policy."

Calculation and Payment by Plan's Associated Governmental Entity of the ADC

An advantage to encouraging the calculation and payment by the plan's associated

governmental entity of the actuarially determined contribution rate would be that the plan

would be actuarially sound, or could help ensure adequate funding.

The volatility of actuarially determined contributions rates could significantly complicate the

annual budgetary process for the associated governmental entity.

Many systems in the state of Texas have fixed rate contributions which are set in state statute.

Fixed rate contributions allow the associated governmental entity the ability to budget.

This is a policy decision.

The amortization period guidance in the current Guidelines is sufficient and should remain.


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Calculating the number is a good exercise for plans with fixed rate contributions so they are

aware of the magnitude of any shortfall.

Needs of Mature Plans

PRB Guidelines should not address the different needs of mature plans: 6

Expressed no opinion or no comment on this question: 4

Plan actuaries are qualified to determine what is needed for any type of plan: 3

Guidelines should reflect special guidance for mature plans: 3

Additional Comments

Guideline 4 is the key guideline.

Most of the mentioned guidance is already in place, so there is no urgent need for the PRB to

come up with its own.

EPFPPF does not believe in an A-F rating system.

The piling on of requirement after requirement has increased the cost of plan administration

and actually harmed public pension plan systems.

Enhance Guideline 4 to include other criteria, such as a funded ratio standard, or

recommendations for benefit enhancements.

Instead of prescribing specific minimum and preferred standards, the PRB could recommend the

following for all public sector plans:

o Formal funding policy that sufficiently funds the plans

o Proof that a plan is following the funding policy

o Periodic actuarial review

Enhance Guideline 4 to include a statement that "Benefit increases should not be adopted if all

plan changes being considered cause a material increase in the amortization period and if the

resulting amortization period exceeds 25 years."

COAERS would recommend that the PRB consider allowing retirement systems time to

implement any changes made from the current PRB Guidelines for Actuarial Soundness, possibly

a two or three actuarial valuation cycle (depending on whether the valuations are performed

annually).

COAERS believes the following items to be best practices: conducting actuarial experience

studies, developing a funding policy, and stress testing.

PRB Guidelines should include items 1 and 5 from the current Guidelines. The other items are

obvious and will either be met or they won't be.

The PRB should focus on reporting information in a transparent manner where members,

citizens, and others can understand the information and compare one plan to another in an

easy, clear manner.

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016 Question 1. What do you view as an appropriate target range and/or suggested maximum boundary for

amortization periods? What, if any, additional recommendations should the PRB Guidelines provide

regarding the use of amortization periods or methods for funding purposes?

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Respondent Response

Fort Worth Employees Retirement Fund (FWERF)

25 years maximum, 15-20 years target range. When an action is taken by either the plan sponsor or the pension board which impacts the term of the amortization period (either extending it beyond the maximum target or reducing it beneath the lower end of the range), a corresponding action to fund the shortfall or refund the overage must be initiated in coordination. Example: If the Pension Board reduces the target rate assumption, the plan sponsor should (must) increase the contribution percentage to ensure the amortization period remains level.

Mark Fenlaw, Rudd & Wisdom

An appropriate preferred target range for the amortization period (AP) is somewhat subjective. If a change is to be made, it could be 10 - 25 years. Maximum AP for an adequate contribution arrangement is also subjective but if a change is to be made, it could be 35 years. I prefer a gradual change of this. There should be no other language regarding the AP except to retain the current second sentence of guideline 4.

Daniel White, Gabriel, Roeder, Smith & Co (GRS)

I view 30 years as the maximum acceptable amortization period. I look to the ASOP and CCA paper when discussing funding with clients. In my opinion, another suggested policy from the PRB is redundant and not useful.

Robert Mitchell The benefits of current and prior employees should be funded over their working lifetime, so it should be at most 20 years. Further, the most expensive portion of benefits is earned in the last 5-10 years of service. So a shorter period would assure that the benefits earned are the benefits funded.

El Paso Firemen's & Policemen's Pension Fund

The El Paso Firemen & Policemen's Pension Fund believes the current PRB guidelines are more than adequate. So much so we have it in our governing statue 6243b.

John Crider, Actuary

The current Pension Review Board Guidelines for Actuarial Soundness provide a very good target range for a public plan’s amortization period. Experience has shown that the lower a fund’s amortization period at the start of a financial downturn, the smaller will be the increase in amortization period due to adverse investment experience. There is a limit to how low an amortization period should be, however. If the amortization period is shorter than the period over which the normal cost is funding its share of benefits, then contributions are, in effect, being made for employees who have not yet been hired, and current taxpayers are bearing a burden which rightly belongs to future taxpayers. Over the last 15 years, financial downturns have made it impossible for many funds to provide ad hoc benefit increases to retirees and beneficiaries. This has, in a number of cases, produced severe hardships on individuals drawing benefits.




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John Crider, Actuary (continued)

Paragraph four of the current Guidelines provides a reasonable balance between (a) fund soundness and (b) providing benefit increases to existing retirees and beneficiaries. I believe that the current Guidelines should remain in place. Individual funds and their actuaries are best able to choose where, inside the Guidelines, a fund should keep its amortization period.

Texas Municipal Retirement System (TMRS)

While there is currently no actuarial standard of practice (ASOP) on amortization periods, the current PRB maximum boundary of 40 years is outside the range of what is generally considered best practice; therefore, the 40 year maximum should be reduced to 30 years. The preferred target range of 15-25 years is appropriate and consistent with best practice.

Employees Retirement System of Texas (ERS)

ERS agrees with the current guidelines regarding amortization period and would not recommend a change. In statute, for all of our pre-funded plans, actuarial soundness is defined as an amortization period of no more than 31 years in order to approve any benefit enhancements. The system ultimately wants to be at least a 100% funded with $0 in unfunded liability and therefore no amortization period at all, but we feel the current PRB guidelines provide an appropriate range that is in line with the best practice recommendations from outside groups.

Texas County & District Retirement System (TCDRS)

The CCA PPC White Paper guidelines are sufficient for a maximum. Having a preferable target as suggested by the GFOA seems reasonable. Closed amortization period is preferable to open. Plans that often combine bases and reamortize their existing UAAL over a new period in effect have an open amortization period.

GRS: Joe Newton, Ryan Falls, Lewis Ward

The current recommended amortization period of 40 years does not align with current best practices regarding the funding policies of public employee pension plans. We suggest that the recommended amortization period be lowered to "30 years or less." However, we believe that the preferred target of 15 – 25 years is still reasonable. We believe that there are various situations and funding policies in which either end of the range, or something in between, would be appropriate.

McAllen Firemen's Relief & Retirement Fund

The current Pension Review Board Guidelines for Actuarial Soundness provide a very good target range for a public plan’s amortization period. I believe that the current Guidelines should remain in place.

City of Austin Employees Retirement System (COAERS)

The City of Austin Employees’ Retirement System (COAERS) has adopted in its Funding Policy an amortization period target not to exceed 25 years. This is based on the current PRB Guidelines for Actuarial Soundness recommended range of 15-25 years. COAERS supports the Guidelines use of a recommended range and believes the PRB should consider the importance of intergenerational equity when establishing the maximum amortization period.




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Teacher Retirement System of Texas (TRS)

According to Government Code § 821.006, 31 years is the amortization period for being actuarially sound. TRS is currently exploring adopting a Plan Management Policy, which would entail a comprehensive review of plan management and funding practices, including best practices for amortization periods.

Dallas Police & Fire Pension Fund (DPFP)

I don't believe the PRB should include a guideline in this area. Please see my final comment.

Tyler Firemen's Relief & Retirement Fund

I think the PRB Guidelines are good. 40 year max 15-25 years is the target I think benefits improvements should be allowed to anything below 20-22 years, and to get an increase to benefits that would make it go back to 20-22 years.

El Paso City Employees' Pension Fund

The summary of the CCA’s guidance on amortization is quite abbreviated in the survey (to the point of inaccuracy). I’d urge the PRB to adopt a policy that reflects the CCA’s guidance to the greatest possible degree.

Elizabeth Wiley, Cheiron

Contributions necessary to pay NC + interest on UAAL recommended as alternative or in addition to AP. Fixed rate plans recommend preferred of 15-20, max of either 30 or 25, and no benefit improvements above 20 (except possibly ad hoc COLAs to 25). Non-fixed rate plans recommend max recommended of 20 years with possible 25-30 year period for transitioning away from an open amortization, also recommend PRB recommend layered approach and consider recommended periods specific to source.

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016 Question 2. What are the advantages and disadvantages of the PRB Guidelines including

recommendations regarding the development of the discount rate or rate of return assumption? What,

if any, recommendations should the PRB Guidelines provide regarding the development of the discount

rate or rate of return assumption? What, if any, recommendations should the PRB Guidelines provide

regarding the appropriate target range and/or maximum boundary?

10

Respondent Response

FWERF The target return rate should be agreed upon by both the actuary and the investment consultant as reasonably achievable based on consensus capital market assumptions. The discount rate as allowed under current ASOP guidance is sufficiently conservative.


ASOP 27 is principles based, not prescriptive, allowing for the professional judgment of actuaries. Neither should the PRB guidelines be prescriptive for actuarial assumptions. The current guideline 5 alone is appropriate for assumptions in my opinion.

Daniel White, GRS

I believe there will be conflict if the PRB guidelines (if any) were not consisted with ASOP 27.

Robert Mitchell An excessive discount rate provides that the people funding the benefit will have a high risk of failing to meet the expected benefits when due, yet investing in the economy to reflect the nation's growth is logical and reasonable. I would set the rate to match the safe assumptions of the state's ability to pay, plus an additional amount to reflect the recent growth in the gross national product. In this environment, that would yield between 4 and 6 percent discount rate.


We do not believe the PRB should be giving or setting guidelines for discount rates since they have no control over investments. How can one set a guideline on unknowns. How can a $1 million dollar fund be treated the same as a $1 billion fund. Funds are bound by the risk they can take given their fiduciary responsibility. Unless the PRB can control asset allocations how can they control discount rates. And since the Actuarial Standard of Practice (ASOP) No. 27 covers the determination of the discount rate. Any recommendation by the Texas PRB would be redundant.


The SOA Blue Ribbon Panel’s approach has just been rejected by the Society of Actuaries and the American Academy of Actuaries when they curtailed the proposed publication by a panel which was advocating adoption of the risk-free rate. As noted in the comment request, Actuarial Standard of Practice (ASOP) No. 27 provides for use of several methods for determining the assumed rate of return used in an actuarial valuation. I do not believe that funds, taxpayers, or the pension community will be better-served by adding requirements which are in addition to ASOP No. 27.

TMRS Actuaries are required to comply with the applicable ASOP (ASOP #27) in setting the discount rate assumption; therefore, it appears unnecessary for the PRB to provide recommendations in this area.

ERS

ERS’ independent consulting actuary is Gabriel Roeder Smith (GRS). GRS follows and complies with current actuarial standards of practice, including ASOP 27. To set a discount rate, the actuary has to agree that a proposed or adopted assumption, including the discount rate, is reasonable. If GRS did not agree that the discount rate was reasonable, actuarial standards of practice would require that our actuaries disclose this fact in their formal actuarial communications on the ERS retirement plans. In addition, historically the ERS Board of Trustees has been guided by a






11

ERS (continued)

combination of professional, independent investment consultants and actuaries whose function is to provide an objective recommendation for asset allocation and likely short and long term return assumptions relative to the Board’s risk tolerance. Given that PRB is not involved in investing and its expertise lies in other areas, ERS does not believe it is appropriate for the actuarial soundness guidelines to comment on discount rate or asset allocation.

TCDRS Actuarial standards, including Actuarial Standard of Practice No 27, provide sufficient guidance in how to develop an investment return assumption and what constitutes a reasonable investment return assumption. No additional guidance from the PRB is needed in this area. In addition, it is not appropriate for the PRB to develop guidelines regarding a target range or maximum boundary. Public retirement plans in Texas have a wide array of investment portfolios that makes it impossible to provide a 'one size fits all' range or maximum. An analysis of the investment return assumption requires an individualized approach. The PRB might consider recommending plans conduct periodic independent actuarial peer reviews, which would include a review of the actuarial valuation and the assumptions used, including the investment return assumption.


We believe that the Actuarial Standards of Practice (ASOPs) provide the most appropriate guidance for setting the discount rate assumption for the measurement of pension plan liabilities. Further, the Actuarial Standards Board is currently working on a new set of actuarial standards that may enhance the current guidance on the discount rate assumption used for measurement of pension plan liabilities. As actuaries are required to comply with the ASOPs, we believe the PRB should not provide any recommendations regarding the appropriateness of the discount rate assumption.


The present use of the Actuarial Standard of Practice (ASOP) No. 27 provides for use of several methods for determining the assumed rate of return used in an actuarial valuation that better serve the funds, taxpayers and pension community.

COAERS

Each retirement system’s asset allocation, risk tolerance, inflation expectations and discount rate development is unique to that retirement system. Furthermore, capital market projections and the associated risk premia for each asset class/sub-asset class can vary depending on each organization’s view of the markets at a particular given time. COAERS does not see any advantages to the PRB Guidelines including specific recommendations regarding the development of the discount rate beyond the existing language which states that the “choice of assumptions should be reasonable, and should comply with applicable actuarial standards”.






12

TRS

TRS recommends that the PRB not take a “one-size fits all” approach to any discount rate guidelines. This is because institutional investors of different sizes have access to different investment opportunities that directly impact their rate of return and assumptions. Plans also have different cash-flow needs that influence asset allocation. TRS has access to high-quality, low-fee investment opportunities to which many individual investors and even smaller institutional investors do not have access. Additionally, TRS has a very healthy ratio of actives to retirees and no termination date. TRS’ current rate of return assumption was based on an extensive asset allocation study which included 2014 Capital Market Expectations Survey results from 17 key TRS investment organizations and Strategic Partners on their intermediate and long-term return estimates and volatility estimates of 50 separate asset classes. TRS used the Capital Market Survey Results to develop the plan’s expected rate of return and determined that a long-term expected return of 8% (geometric/compound) was reasonable. Further, TRS’ actuaries found that the asset allocation study process and results met the requirements under Actuarial Standards of Practice (ASOP) 27 for reasonableness in the plan’s 2015 experience study. TRS recognizes that interest rates have continued to decline since the 2014 asset allocation study and the 2015 experience study and there is value in continuing to examine whether our 8% return assumption is appropriate.

DPFP The PRB should not dictate a discount rate or a range of discount rates. I don't believe it is the role of the PRB to dictate the rate and I don't believe the PRB has the expertise to determine long-term forward-looking rates for the capital markets. The role of the PRB should be to require that the actuary, fund and the investment consultant retained by the fund (if any) should be required represent that they believe the rate is reasonable. Perhaps if the rate is an outlier on the typical bell-curve, the fund could be required to disclose why the fund has determined that their rate is reasonable.


The disadvantage of the PRB developing a standard rate of return is that all plans are different and the assumed rate of return could limit the types of investments a plan could make. Example would be if the PRB chose a risk-free rate then plans would probably not be as likely to invest as much in stocks and if stocks were very much in favor at the time, we would lose out on large returns. I just feel that it would take a lot of control from the local boards, which I am definitely against.


As noted in the question, Actuarial Standard of Practice (ASOP) No. 27 covers the determination of the discount rate. Any recommendation by the Texas PRB would be redundant.






13


Recommend PRB reflect on appropriateness of detailed recommendations in this area. One area a PRB recommendation might be appropriate is recommending that the process used in developing the assumption be forward looking. PRB may want to recommend that the purpose of a discount rate be disclosed as well, but this is already required by the ASB, so I definitely think the PRB should carefully consider the existing ASB guidance before going down this route.


recommendations regarding asset smoothing techniques? What do you view as an appropriate target

range and/or suggested maximum boundary to be used for asset smoothing?

14

Respondent Response

FWERF Appropriate target = five years. A five-year smoothing technique recommendation would be advantageous in order to provide reporting consistency for peer comparison. Peer comparison is difficult enough due to differing asset allocation, AUM, and benefit design, reducing the differences associated with actuarial smoothing period would simplify comparisons.


The Actuarial Standards Board (ASB) provides the actuary appropriate principles-based guidance on asset valuation in ASOP 44, "Selection and Use of Asset Valuation Methods for Pension Valuations". The disadvantage of the PRB guidelines trying to include guidance on asset smoothing is the challenge of trying to carve out a subset of ASOP 44 in a prescriptive way without the context of the rest of ASOP 44 and without the resources of the ASB.

Daniel White, GRS

I believe there will be conflict if the PRB guidelines (if any) were not consisted with ASOP 44 (asset smoothing for pension plans).

Robert Mitchell

Economic cycles run between 5 and 8 years in recent history, in my observation. That is the only economic justification I can support for asset averaging. Five is generally enough, without undue complexity.


The SOA Blue Ribbon panel simply asserted that five years should be the maximum smoothing period. They did not provide any analytical support for this point of view. The CCA recommendations are supported by analysis and, in the absence of a competing analysis that points to different conclusions, are the ones that should be advocated by the PRB. EPFPPF currently uses a five-year smoothing period. We have had no issue with this time period.


ASOP No. 44 provides extensive guidance with respect to smoothing periods used in calculating the actuarial value of assets used in a valuation. Adjustments to the market value of assets corridor are provided which vary according to the length of the smoothing period. I do not believe that the GFOA has sufficient expertise to set guidelines in this area. Neither do I believe that use of straight market value is appropriate for either funding or financial reporting disclosures. The taxpayers and the pension community will not be well-served by adding requirements which are in addition to those in ASOP No. 44.

TMRS Asset smoothing methods are addressed in the ASOPs (ASOP #44) which should be considered the most appropriate guidance on this topic; therefore, it appears unnecessary for the PRB to provide recommendations in this area.




15

ERS

The references above to SOA and GFOA do not allow for differences in smoothing methodology (ie, Fixed Base method versus Adjustment methods and the numerous variations on those methods) that may be appropriate for different plans. ERS currently uses the Adjustment Method, but plans to revisit smoothing methodology during its pension experience study beginning next year. ERS does not believe the guidelines should be prescriptive in this area, although the system is more supportive of the GFOA requirements since the Board’s short term investment assumption, based the current asset allocation, follows a 5-10-year horizon. ERS believes that the Actuarial Standards of Practice also provide appropriate guidance for establishing asset smoothing methods for use in actuarial valuations of pension plans.

TCDRS There is a balance between the smoothing period and the corridor, and they must be looked at in tandem. Longer smoothing periods call for tighter corridors. A 15 year (or longer) smoothing period might be appropriate depending on the corridor. Also, it is important to consider that non-traditional asset valuation techniques that do not fit this general model may be appropriate. This in an area where an independent peer review may be more appropriate than a prescribed approach.


We believe that the Actuarial Standards of Practice (ASOPs) provide the most appropriate guidance for establishing asset smoothing methods for use in actuarial valuations of pension plans. Further, the Actuarial Standards Board is currently working on a new set of actuarial standards that may enhance the current guidance on the discount rate assumption used for measurement of pension plan liabilities. As actuaries are required to comply with the ASOPs, we believe the PRB should not provide any recommendations regarding the appropriateness of asset smoothing methods.


I do not believe any additional requirements are needed by PRB in addition to those covered in ASOP No.44.

COAERS COAERS does not see any advantages to the PRB Guidelines including specific recommendations regarding the asset smoothing techniques beyond the existing language which states that the “choice of assumptions should be reasonable, and should comply with applicable actuarial standards”.

TRS TRS uses a five-year smoothing period. TRS recognizes that longer smoothing periods can result in wide differences between market and actuarial value and supports a shorter (five years or less) smoothing period. Additionally, standardized guidelines regarding asset smoothing techniques provide interested parties with the ability to compare and contrast plans. TRS agrees with the GFOA recommendation.

DPFP Again, I don't believe the PRB should dictate assumptions. If it is necessary, I support no longer than 5-year smoothing for Plans that determine their employer contributions based on the valuation. For Plans with fixed contribution rates I don't think the concept of smoothing makes sense at all. The PRB and others should focus more on the market value funding level than the actuarial value.




16


I feel that 5-year smoothing is a good length of time. With the market cycles that we have experienced in the last 15 years, I have seen where a 5-year smoothing works both ways in not capturing all the gains in a high return rate year but also not show all the negative to a retirement system that a bad return rate year could have shown.


The SOA Blue Ribbon panel simply asserted that five years should be the maximum smoothing period. They did not provide any analytical support for this point of view. The CCA recommendations are supported by analysis and, in the absence of a competing analysis that points to different conclusions, are the ones that should be advocated by the PRB.


I question if the PRB should go beyond reference to the ASB and particularly ASOP No. 44. If the PRB feels the need to make a recommendation, I think 5 years for the recommended period and 15 years for a maximum would make sense.

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016 Question 4. What are the advantages and disadvantages of the PRB Guidelines incorporating guidance

on the use of asset smoothing corridors? If PRB Guidelines were to include guidance on the use of asset

smoothing corridors, what should be used as a target range and/or maximum boundary?

17

Respondent Response


ASOP 44 provides the actuary appropriate principles-based guidance on asset corridors in Section 3.3.

Daniel White, GRS

I believe there will be conflict if the PRB guidelines (if any) were not consisted with ASOP 44 (asset smoothing for pension plans).

Robert Mitchell

The current CCA White Paper is well reasoned and would be appropriate.


Pensions should not be measured on a yearly basis. If the 80/120 mark is to be used and cannot go outside at any point in time will the PRB be mandating funds take more risk. Since most funds have no control over contributions, investments will have to pick up the rest. A fluctuating MVA ever year is very unstable for governments and funds.


The issues in this item are addressed in the comments on Item Three, above.

TMRS Asset smoothing corridors are addressed in the ASOPs (ASOP #44) which should be considered the most appropriate guidance on this topic; therefore, it appears unnecessary for the PRB to provide recommendations in this area.

ERS ERS believes that the Actuarial Standards of Practice also provide appropriate guidance for establishing asset smoothing methods for use in actuarial valuations of pension plans. ERS does not use asset corridors. However, as with the question on asset smoothing, we do not believe the guidelines should be prescriptive in this area.

TCDRS See 3 above. In general we agree with the CCA PPC White Paper approach, which is consistent with the guidance in Actuarial Standard of Practice No. 44.


We believe that the Actuarial Standards of Practice (ASOPs) provide the most appropriate guidance for establishing asset smoothing methods for use in actuarial valuations of pension plans. Further, the Actuarial Standards Board is currently working on a new set of actuarial standards that may enhance the current guidance on the discount rate assumption used for measurement of pension plan liabilities. As actuaries are required to comply with the ASOPs, we believe the PRB should not provide any recommendations regarding the appropriateness of asset smoothing methods.


I do not believe any additional requirements are needed by PRB in addition to those covered in ASOP No.44.

COAERS COAERS does not see any advantages to the PRB Guidelines including specific recommendations regarding the use of asset smoothing corridors beyond the existing language which states that the “choice of assumptions should be reasonable, and should comply with applicable actuarial standards”.

TRS TRS does not use a corridor because our actuary’s simulations show that it is unnecessary and increases volatility.

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016 Question 4. What are the advantages and disadvantages of the PRB Guidelines incorporating guidance

on the use of asset smoothing corridors? If PRB Guidelines were to include guidance on the use of asset

smoothing corridors, what should be used as a target range and/or maximum boundary?

18

DPFP Again, I don't believe the PRB should dictate assumptions. I agree, that boundaries are important especially as the smoothing period increases so the actuarial value doesn't mask larger, longer term problem. 80%/120% is reasonable.


I like no more than 110% or no less than 90%. I feel like this should be the board's decision along with the advice of their Actuary, with some rough guidelines from the PRB.


The CCA recommendations are supported by analysis and, in the absence of a competing analysis that points to different conclusions, are the ones that should be advocated by the PRB.


Again, I do not think this is an area that the PRB should necessarily opine on. If the PRB does opine, I think either no maximum corridor or a corridor of 50%/150% should be recommended for smoothing periods of 5 years or less declining to a 80%/120% corridor for the maximum corridor length I’d consider of 15 years. I note that ASOP changes now require disclosing the funded status on the basis on MVA whenever reported on the basis of AVA.

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016 5. What are the advantages and disadvantages of the PRB Guidelines including a requirement for an

actuarial experience study to be completed at least once every 5 years for all plans regardless of assets?

What should constitute an actuarial experience study and how should that definition vary by plan size, if

at all?

19

Respondent Response

FWERF Expense is the biggest disadvantage; accuracy is the biggest advantage. However, for larger plans, a five-year experience study practice is likely already in place. I agree with a five-year experience study cycle. I have no experience with smaller plans, so I don't know how an experience study might be modified to fit the specific participant group.


State law recognizes that the cost of an experience study in relation to assets is a reasonable consideration. The state law also does not try to define what should be in an actuarial experience study. This is a good thing because what should be studied will vary from plan to plan. For example, a plan might be large enough with 400 actives to get a credible study of the termination experience, but only the 4 state-wide systems have enough pensioners to get credible results of a mortality experience study. I prefer for the PRB not to include a requirement for experience studies in its guidelines.

Daniel White, GRS

No comment.

Robert Mitchell

Experience study is essentially a statistical review of the credibility of assumptions. Larger systems have more data, and generally expect more credible and stable results, while smaller systems have a wider beta component to their results. Large systems should monitor key statistics more frequently, while smaller systems should pool their data with similar groups. Because the expense of a well-managed study is modest in relation to the funds of the larger plan, each key statistical component should be reviewed annually, especially for compensation and rates of retirement. Mortality should be compared to national trends every 5 years, using a generational table between studies. Smaller systems will have more anecdotal events, but still should review the compensation and retirement assumptions at least every three years, or when benefit structure changes have been made.


Please remember every additional report, valuation, study, etc cost the funds money. It would seem more efficient for small funds to require a comprehensive assumption review. ASOP No. 27 and No. 35 cover the setting of assumptions, and the PRB should refer to them regarding how assumptions should be set.


Many plans have actuarial experience studies performed without regard to whether fund assets are at least $100 million or the passage of a certain period of time. Actuaries tailor such studies to meet each individual fund’s situation. Comprehensive studies are expensive and time-consuming. It is my belief that an actuary who is qualified to serve public plans in Texas is qualified to judge what experience studies are needed and how often they should be performed. Experience studies can reveal the sources of gains and losses which a fund is experiencing. However, they can increase the cost of actuarial work performed on the plan. Such increased cost lowers the fund’s net rate of return and thereby lowers the rate at which the fund’s amortization period is decreasing. Experience studies should be performed on an as-needed basis. A one-size-fits-all approach should not be adopted. Neither should the $100 million threshold be lowered.




at all?

20

TMRS Actuaries must attest to the reasonableness of assumptions used in every actuarial valuation. TMRS performs an experience study every four years. We have no opinion as to whether the requirement to perform an experience study at least every five years should apply to all plans regardless of size.

ERS ERS fully supports – and complies with – the requirement that systems of larger size conduct experience studies at least every five years. However, for smaller systems with a limited population and unpredictable experience, this may not be an appropriate recommendation. We believe this commentary is best provided by those systems directly.

TCDRS It is reasonable for all plans to review assumptions periodically, and a five-year maximum between studies seems reasonable. However, the scope needed for a meaningful experience study can vary dramatically by plan, and this is not only due to plan size. It is also a function of plan design and benefit provisions. For example, the retirement rate assumption may be critical for one plan design and not as important for another. Rather than having the PRB prescribe a specific approach for conducting an experience study based on plan size, this is an area where public plan actuaries are best suited to recommending the scope of the investigation.


We support the use of regular experience studies to establish appropriate assumptions for measuring pension plan obligations, when appropriate. However, there may be other considerations when determining whether to extend the actuarial experience study requirement currently contained in the Texas Government Code to retirement systems in Texas with less than $100 million. An actuary must attest to the reasonableness of the actuarial assumptions in every actuarial valuation report. As a result, the actuary must use appropriate assumptions in each actuarial valuation even without the use of a formal experience study. Additionally, actuaries must comply with the credibility requirements of ASOP Nos. 25 and 35 when setting assumptions. As a result, a full-blown analysis of the experience of a retirement system with less than $100 million may not provide results that can be relied upon to set credible assumptions. In these cases, the actuary may need to rely on published tables or the study of a broader group with relevant experience. Further, the ASOPs require the actuary to disclose the information and analysis used in selecting each assumption that has a significant effect on the measurement.


The cost of actuarial work performed on the plan lowers the fund’s net rate of return and thereby lowers the rate at which the fund’s amortization period is decreasing. Experience studies should be performed on an as-needed basis. An approach to require such a study be conducted without taking into account of the cost impact to a fund should not be adopted. The present $100 million threshold should not be lowered.




at all?

21

COAERS PRB Guidelines for Actuarial Soundness serve as best practices for public retirement systems in Texas. As such, including such a requirement would go beyond best practices. State law has established a requirement for retirement systems with assets of at least $100 million to conduct an actuarial experience study at least once every five years. The Guidelines could recommend conducting an experience study in an appropriate time frame as a best practice, but COAERS believes the Guidelines should avoid including any requirement that is not consistent with State law.

TRS According to Government Code § 825.206, TRS is required to conduct an actuarial experience study at least once every five years. TRS completed its most recent experience study in September 2015 and is examining whether to conduct a study again within the next two to three years as part of a potential plan management policy. Therefore, TRS can see the value in studies being conducted more often than once every five years, especially given the current economic environment. The advantage of conducting the study more often is to identify and respond more rapidly, if appropriate, when experience does not match the assumption set. However, experience studies can be expensive and it may be cost prohibitive for smaller plans to conduct them frequently.

DPFP Experience studies should be conducted at least once every five years for plans over a certain size. I am not sure if $100 million is the correct size or not because I do not know the implication of the cost on their budgets. The only reason for the size limitation is the cost/benefit issue. If the funding comes from the State for smaller plans to complete the study, then it is appropriate to include the requirement for all plans. An experience study should review all economic and demographic assumptions used in the valuation compared to the actual experience and make recommendations for adjustments based on the five-year actual experience and/or the expected future experience if appropriate.


If you are talking about a normal actuarial study for a plan, most that I know do them once every 2 years. Some do them every year and some once every 3 years. I think once every 2 years is perfect. If you are talking about something else, then I do not understand what you are talking about.


I think it would be preferable to require a comprehensive assumption review, which could consist of experience studies where appropriate. Statistical credibility is obviously a factor in the extent to which a system’s own experience can be used to set or evaluate assumptions. ASOP No. 27 and No. 35 cover the setting of assumptions, and the PRB should refer to them regarding how assumptions should be set. We will note that many plans in Texas only do a funding valuation every other year, and thus only provide census data every other year. The requirement that experience studies be performed every five years means that these plans are forced to either only use four years of experience in the study or use six years. However, if they choose to use six years in the study, two of the years would overlap with a previous study, and give the experience in




at all?

22

El Paso City Employees' Pension Fund (continued)

that period more weight in the setting of assumptions. We feel that allowing plans that only provide census data every other year to perform experience studies every six years would still allow for timely experience review, and allow the plan enough data points to allow for a more thorough study.


I recommend experience studies be done at least every five years for all plans, regardless of size. I do think this is an area where an explicit item from the PRB in the Guidelines could strength the requirements of the ASOPs.

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016 Question 6. What are the advantages and disadvantages of the PRB Guidelines including additional

guidance regarding which actuarial cost methods meet this requirement? What, if any, additional

recommendations should the PRB Guidelines provide regarding the use of various cost methods?

23

Respondent Response

FWERF Cost method recommendations should align with ASOP & GASB. Again, consistency of peer comparison is the advantage of the PRB providing recommended guidance for this methodology.


Guideline 2 is very straight forward and not controversial. No amplification is needed in my opinion.

Daniel White, GRS

No comment.

Robert Mitchell

The actual liabilities for a participant grow exponentially over their career, but a level pay funding method provides some measure of budgeting for older employees by charging more than true costs during early years. The concept of level or declining cost is a device for charging younger employees for the older employees, in the expectation that more funds will be there when they retire. It requires a funding discipline, and the stated standard helps to achieve this. However, if a new or more expensive benefit layer is provided, it should be expensed and funded over the working lifetime of the employees who benefit. No portion of that increase should be allocated to prior service. If that increases costs, then the honest effect of the increase will be known.


The existing guidance is sound and should not change.


The language in the Guidelines is very good and is sufficient. Actuaries are also constrained by Actuarial Standards of Practice. Together, these items provide very good guidance. Additional requirements would make compliance more difficult without providing any meaningful benefit.

TMRS The current PRB guideline is appropriate and it does not appear that additional guidance is needed.

ERS ERS supports the normal cost methodology outlined in the current Guidelines for Actuarial Soundness and does not believe any revisions are needed.

TCDRS This requirement is reasonable and no additional prescriptive guidance is needed.


This first step in determining the funded status of a pension plan is to calculate the Actuarial Present Value of Future Benefits (PVB). This calculation is based on the actual benefits payable to each member and the actuarial assumptions adopted by the Board. This calculation is independent of the Actuarial Cost Method selected for the valuation. The Actuarial Cost Method allocates the PVB between the Actuarial Accrued Liability (past service) and the Present Value of Future Normal Costs (future service). Each Actuarial Cost Method accounts for the exact same PVB and only differs in the pattern

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016 Question 6. What are the advantages and disadvantages of the PRB Guidelines including additional

guidance regarding which actuarial cost methods meet this requirement? What, if any, additional

recommendations should the PRB Guidelines provide regarding the use of various cost methods?

24

GRS: Joe Newton, Ryan Falls, Lewis Ward (continued)

of cost allocation over time. For funding purposes, we believe that an appropriate Actuarial Cost Method should produce a normal cost that is not expected to increase over a member’s career. We do acknowledge that there are scenarios in which the normal cost would be expected to increase over generations of members which we would consider appropriate. For example, the use of generational mortality procedures would produce an increasing normal cost over generations of members and would be an appropriate increase in the normal cost.


The language in the Guidelines is sufficient and I see no need for additional requirements.

COAERS COAERS does not see any advantages to the PRB Guidelines including specific recommendations regarding which actuarial cost methods meet this requirement beyond the existing language “and should be calculated under applicable actuarial standards”.

TRS TRS’ normal cost allocation is level percent of payroll. TRS concurs that the allocation of normal cost should generally be either level or declining as a percent of payroll; however, there could be scenarios where an increasing normal cost would be appropriate depending on plan design. The appropriate methodology is dictated by the situation at hand.

DPFP I don't believe the PRB should include a guideline in this area. Please see my final comment.


I do think that contributions should be level over all generations of taxpayers.


The existing guidance seems sound.


I think the current “should be calculated under applicable actuarial standards” should be retained. I recommend the PRB Actuarial Committee turn to the CCA PPC White Paper if additional recommendations are desired.

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016 Question 7. If the PRB Guidelines included additional guidance regarding actuarial cost methods, which

cost methods should be recommended? Which cost methods should be deemed as unacceptable?

25

Respondent Response


Sections 3.13 and 3.14 of ASOP 4 provide appropriate guidance for the actuarial cost method and allocation procedure. Perhaps the PRB would consider adding "and methods" to guideline 5 so that it would read, "The choice of assumptions and methods should be reasonable and should comply with applicable actuarial standards."

Daniel White, GRS

No comment.

Robert Mitchell

Ultimate Entry Age is an artificial construct that hides the true cost of benefits. I object to any entry age method which does not recognize that changes in benefit structure should be charged over the remaining working lifetime of those benefiting. In a stable benefits environment, individual entry age normal is an acceptable method. Any actuary should be able to use other cost methods besides this method to reflect the reality of benefits. One of the key criticisms of any entry age method is that it allocates too much of the deviations to past service, and is not responsive to the costs. If a benefit changes by more than 5 percent in value for an individual within 10 years of retirement, it is not appropriate to fund it as past service liability over 30 years.


EPFPPF would encourage the use of the CCA’s guidance as to what constitutes an acceptable funding method.


The publications published by the Pension Review Board show the actuarial cost method used by each Texas Public plan. I do not remember seeing a plan which used an inappropriate cost method. Even if a plan did use such an inappropriate method, the entry age method required under GASB Statements 67 and 68 would reveal any problems which the inappropriate method produced.

TMRS There are many different factors to be considered in determining the appropriate cost method for funding purposes in different circumstances. It would be difficult for the PRB to provide guidance that allows for the flexibility needed to address the different situations.

ERS

As PRB is aware, GASB 67 and 68 are accounting standards that require very prescribed calculations. Those requirements are not necessarily appropriate for funding standards and valuation methodology selected by a system board. For ERS administered plans, every dollar of liability of is accounted for in our choice of normal cost method. The selection of normal cost methodology by a system board, upon advice of the actuary, is simply a policy choice by the board about what is the best reflection of base benefit cost versus actuarial accrued liability. ERS generally supports the use of entry age normal, which is an industry standard. We use a variation of entry age normal method, generally referred to as ultimate entry age, in our ERS and LECOSRF plans because we have three groups of benefits. At the time of the implementation of Group 2 in 2009, our plan sponsor (the Texas Legislature) indicated an interest in focusing on the base benefit cost of new hires, so the board adopted the ultimate entry age normal



26

ERS (continued)

method that allowed the system to best express the cost of a new hire. As long as every dollar of liability is accounted for, the variations in normal cost should not matter and ERS believes that the PRB guidelines should not be prescriptive in this area.

TCDRS The GASB standards are designed to promote comparability in financial reporting and are not appropriate for funding purposes. The CCA White paper provides a more reasonable approach. The PRB might want to maintain a list of known cost methods that always meet or always do not meet the requirement of item 2 of the PRB guidelines.


There is a wide variety of Actuarial Cost Methods and many of them do have merit in certain circumstances. For this reason, we do not believe that the PRB should provide any further guidance on Actuarial Cost Methods than exist in the Actuarial Standards of Practice and should not attempt to categorize them. In an effort to improve comparability in financial reporting, the GASB wanted to select a single Actuarial Cost Method for calculating the Total Pension Liability and they chose the Individual Entry Age Normal (IEAN) method. However, this decision by the GASB does not have any bearing on what the best Actuarial Cost Method might be for funding/budgetary purposes or for evaluating fixed contribution rates. There is a variant of the common Entry Age Normal Actuarial Cost Method that is used with plans where members hired after a certain date have a different set of benefits that those members hired prior to that date (i.e., a “tiered plan”). In these cases, there are advantages to basing the normal cost on the benefits payable to a new member (and not the actual benefits that may actually be payable to the member). This method is generally referred to as the “Ultimate Entry Age Normal (UEAN).” As previously stated, the actual benefits payable to each member are accounted for in the PVB and this method only impacts the allocation of the cost over time. IEAN with a tiered plan produces a normal cost that is expected to change over time as the proportion of members covered by each tier changes over time. Because of this changing normal cost, advanced and complicated actuarial techniques, like open group projections, would be necessary to correctly calculate the amortization period for a tiered plan with a fixed contribution rate. This introduces more assumptions and possible sources of deviation, and thus this may not be the most preferable approach for all plans. Alternatively, UEAN provides a much more stable normal cost for tiered plans which is very desirable for budgeting purposes. Further, calculation of the amortization period is a much more straight-forward calculation when the normal cost is expected to stay stable. It is important to point out that the CCA White Paper does acknowledge that “Ultimate Entry Age Normal Cost may be useful to illustrate the longer-term Normal Cost for combined tiers or to evaluate fixed contribution rates.”



27


The entry age method required under GASB Statements 67 and 68 are sufficient and would reveal any problems which the use of non-recommended practices and unacceptable practices produced.

COAERS COAERS does not see any advantages to the PRB Guidelines including specific guidance regarding actuarial cost methods beyond the existing language “and should be calculated under applicable actuarial standards”.

TRS TRS uses Ultimate Entry Age Normal as our actuarial cost method. Individual Entry Age Normal provides less stability and predictability in that the amount of contributions available to pay down the unfunded liability would vary from year to year. This variability is at odds with the goal of predictability in plan funding. Given that it is required by GASB, TRS does use Individual Entry Age Normal to calculate the liability for accounting purposes. In TRS’ experience, there is very little difference in the total amount of the liability when calculated under the different methods. Therefore, given the volatility that Individual Entry Age normal introduced into the process, TRS recommends the use of Ultimate Entry Age Normal.

DPFP I don't believe the PRB should include a guideline in this area. Please see my final comment.


I prefer the Entry Age Actuarial Cost Method.


I would encourage the use of the CCA’s guidance as to what constitutes an acceptable funding method.


I believe the recommended method should be the Individual Entry Age Normal consistent with the LCAM Model practice from the CCA PPC White Paper and GASB 67 and 68. I think guidance beyond that one recommendation would perhaps be more appropriate in a PRB White Paper.

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016 Question 8. What are the advantages and disadvantages of changing the title of the PRB Guidelines for

Actuarial Soundness to reflect the funding responsibility of the plan sponsor? What title do you suggest

to appropriately reflect this shared responsibility?

28

Respondent Response

FWERF PRB Guidance for Responsible Pension Funding


The title should be reasonably short and not another subject that could be an additional guideline.

Daniel White, GRS

No comment.

Robert Mitchell PRB Guidelines for Proper Recognition of Future Pension Payments


PRB Guidelines for Actuarially Sound Funding of Retirement Plans Maintained by Texas Governmental Employers


Changing the PRB Guidelines to reflect plan sponsor and plan member funding responsibilities is probably something that could only be handled through legislation. I question whether the PRB has the authority to impose funding requirements on Governmental

TMRS The current title is appropriate.

ERS ERS believes the current title is clear, so we would not recommend a title change.

TCDRS The title already implicitly states this. There are many other aspects that that also help determine actuarial soundness and it seems arbitrary to single this aspect out.


We do not have an opinion on the title of the Guidelines.


There is no advantage changing the title of the PRB Guidelines.

COAERS Not enough space included, please see answer to Question 9.

TRS TRS has no suggestions on changing the title of the PRB Guidelines for Actuarial Soundness.

DPFP I don't understand this question.


Pension Funding Requirements


I suggest the title “PRB Guidelines for Actuarially Sound Funding of Retirement Plans Maintained by Texas Governmental Employers.”


PRB Guidelines for Pension Management might be better as it does not include the term Actuarial Soundness, which is not generally defined. It also communicates the breadth of Pension Management for health.

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016 Question 9. The PRB recognizes the importance of the funding responsibility of both the plan members

and the associated governmental entity. What are the advantages and disadvantages of the PRB

Guidelines directly referencing the funding responsibility of the plan’s associated governmental entity?

How would you suggest the Guidelines be updated to reflect this responsibility?

29

Respondent Response

FWERF For Fort Worth, the advantage would be clarity of roles/responsibilities. The PRB should include guidance that the plan sponsor acknowledges in writing each year that the ARC is or isn't met, with explanation.


The PRB's December 2014 report to the Legislature had as its first recommendation, "The retirement system sponsor and the system should establish an adequate funding policy." Perhaps the PRB could come up with an additional guideline that states that recommendation with wording consistent with the existing guidelines, such as, "The governmental entity sponsoring the pension plan and the board or committee responsible for the plan's governance should together establish an adequate funding policy that appropriately reflects the responsibilities of the plan members and the sponsoring governmental entity."

Daniel White, GRS

No comment.

Robert Mitchell

Where an agency has a rule of governance that plan members must provide a set portion of benefit costs, the agency has a duty of full disclosure to its members, along with their duty to those who fund the employer portion of costs. The honest truth would show that younger participants pay more than a fair share, while older participants are earning benefits largely at the employer's expense. As the funding method is intended to reflect level costs, an honest design would show the account value built up for each person from their own funds and the total plan liability for the benefits they have earned to date. A cash balance plan would be ideal for this purpose, but that is not the normal benefit structure. An additional point is that the level funding method creates a fiscal chain on workers, because they dare not leave their employer at risk of losing those high end-of-career benefits. But, to answer the question, I would look to the PRB to explain how well funded are the employee contribution accounts, how long before the funds would be exhausted if employer funding is not made, and the range of costs if two different economic scenarios occur, the current assumptions vs. the most recent 5 years' experience.


We do not feel there is a disadvantage. But we believe funding should be joint and proportional so there is always a shared cost to any underfunding. No one entity should bare the entire cost unless they caused the underfunding. The entity causing the underfunding (ie contribution holidays, not paying normal cost) should bring the fund to par and then adopt a shared responsibility.


(Same as Item 8) Changing the PRB Guidelines to reflect plan sponsor and plan member funding responsibilities is probably something that could only be handled through legislation. I question whether the PRB has the authority to impose funding requirements on Governmental entities in the State of Texas.

TMRS It does not appear necessary for the PRB to address this topic. The TMRS Act specifies the employer and employee funding responsibilities.





30

ERS ERS supports a brief reference to the plan sponsor’s role in benefit design and contributions, but has no specific recommendations.

TCDRS It is important to focus on both employer and plan member funding of public plans. This helps see both the total cost of the plan and the sharing of the cost between the employer and members. Only focusing the employer cost gives an incomplete picture of plan financing.


We do not have any comment on whether the Guidelines should allude to funding responsibility.


The funding responsibility is strictly through legislation and no advantage would be gained by having the PRB Guidelines referencing it.

COAERS COAERS does not see any advantages to directly referencing the funding responsibility of the plan’s associated governmental entity. The Constitution and State law establish the funding responsibility for public retirement systems. PRB Guidelines for Actuarial Soundness serve as best practices for public retirement systems in Texas. Including a recommendation to for retirement systems to develop a funding policy as a best practice would be more appropriate.

TRS Rather than PRB guidelines focusing on the funding responsibilities of the plan sponsor, the PRB guidelines may better serve governmental plans by looking at total contributions and if those contributions are sufficient. For example, in 2013 TRS’ funding was greatly improved due to a shared increase in contributions between the members and the state and instituting contributions for employers who do not participate in Social Security. The focus was on increasing total contributions through a shared solution. Therefore, TRS recommends that the guidelines emphasize total contributions and the shared responsibility for plan funding.

DPFP This is not the PRB's role.


I am not sure what you are wanting here. I would like the PRB to address governmental entities that have more than one pension plan and they fund one group of employees more than the other. Our city is a good example. One group of employees has TMRS along with Social Security, and the other group has their own retirement plan and no Social Security. Group One receives around 20.85% contribution to TMRS and 6.2% to Social Security. Group two (Firefighters) receive the matched rate 20.85% and NOT the other 6.2%. Any PRB Guidelines on this would be appreciated.


I think any changes to the Guidelines to address this subject ultimately have to reflect the PRB’s enforcement powers (such as they are).





31


I was unclear on this question, so have not really addressed it.

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016 Question 10. What are the advantages and disadvantages of the PRB Guidelines encouraging the

calculation and payment by the plan’s associated governmental entity of the actuarially determined

contribution rate as opposed to an annual fixed rate?

32

Respondent Response

FWERF The advantage is that the pension plan would be actuarially sound and prudently funded, which is how it should be. Simple concept, unfortunately difficult to enforce.


The main disadvantage is that the Legislature and other governmental entities sponsoring "fixed rate" pension plans would ignore that guideline. The beauty of the current guidelines is their practicality.

Daniel White, GRS

The decision to fund based on a calculated rate or an annual fixed rate is a policy decision.

Robert Mitchell A fixed rate promotes good budgeting, and a cash balance plan would be well served by this method. A defined benefit with potential large swings in experience over the short or intermediate time spans needs a mechanism to adjust their cost structure. At the same time, excessive good experience like a market bubble must be tempered by future expectations. In that case, fixed rates assure that contributions are still made even if the plan is well funded. So there are arguments for both. Generally, the actuarially determined cost is preferable.


If the PRB wishes to provide some additional guidance they can subject the use of fixed rates to the guidance provided by the CCA. Fixed rates give employees and employers some reassurance of normalcy so budgets are not strained.


The so-called Actuarially Determined Contribution (ADC) in GASB Statements No. 67 and No. 68 is so broad that requiring that the ADC be contributed would be useless. For example, one definition of ADC in GASB 68 is simply the statutory or contractually required contribution. There is no correlation between such a rate and the amount needed to fund the plan. The amortization period guidance in the Guidelines is very good and should remain the standard for Texas public plans.

TMRS The TMRS Act and funding policy requires all participating employers to pay the actuarially determined contribution rate.

ERS For its three pre-funded plans, ERS is funded as a fixed rate system. We would fully support being funded on an actuarially determined contribution basis, but we also recognize that each plan sponsor will have varying legal and practical limitations that may be difficult for PRB to distill down to a few broad guidelines.

TCDRS There is nothing inherently wrong with a fixed rate plan. Plans with a fixed rate may actually have more conservative funding than plans with an annual actuarially determined contribution rate. An adequately funded fixed rate plan is one that has a funding policy that currently meets PRB funding guidelines and adequately addresses any rate (or benefit) adjustments needed to restore it to actuarial balance.


The volatility of actuarially determined contribution rates can significantly complicate the annual budgetary process for the associated governmental entity and ultimately impact long-term sustainability of the pension plan. Further, we believe that there are appropriate ways to fund a pension plan using a fixed contribution rate funding policy.




33

GRS: Joe Newton, Ryan Falls, Lewis Ward (continued)

The Guidelines, as currently constructed, implicitly encourage the payment by the plan's associated governmental entity of the actuarially determined contribution by providing recommended amortization periods. When the fixed contribution rates do not produce an amortization period within the recommended range, then the associated governmental entity should be encouraged to increase the contribution rate or bring the funding period back within the Guidelines through other measures.


The amortization period guidance in the Guidelines is very good and should remain the standard for Texas public plans.

COAERS State law requires a system’s actuarial valuation include a recommended contribution rate needed to achieve and maintain an amortization period that does not exceed 30 years, thus the PRB Guidelines do not need to encourage the calculation of an actuarially determined contribution rate. Many retirement systems in the State of Texas have fixed rate contributions set in State law. The PRB Guidelines establish the funding period target through setting the recommended and maximum amortization period. It should be the retirement system and plan sponsor’s responsibility to determine the best path to meet or exceed that target. Fixed contribution rates help plan sponsors budget their retirement system costs. Should the need for additional funding arise, plan sponsors could consider their ability to provide additional supplemental funding above the fixed rate amount. For instance, the City of Austin has a fixed contribution rate set in State law, but provides funding above that amount in a supplemental funding agreement between the City and the System. Lastly, fixed contribution rates ensure that neither the plan sponsor nor the members take a contribution holiday.

TRS While calculation and payment of the actuarially determined contribution rate could help ensure adequate funding, it does result in more volatility and less stability for a plan sponsor. A fixed contribution rate could result in underfunding if it is set too low, but it does provide predictability for plan sponsors who have a variety of budget drivers and plan administrators who are trying to gauge future contributions.

DPFP I think calculating the number is a good exercise for plans with fixed rate contributions so they are aware of the magnitude of any shortfall. With all due respect, I can't imagine having the PRB "encourage" a governmental entity to pay a higher contribution rate would be the deciding factor in the entity making the budget decision to pay the calculated contribution rate. It makes me wonder, if encouraging is the first step to requiring.


As long as the rate is at a level that is actuarially sound to the fund, I feel that it should at some time be level over generations of taxpayers.




34


This is a good idea, but if the PRB wants to provide some additional guidance they can subject the use of fixed rates to the guidance provided by the CCA.


An alternative to recommending ADECs would be to recommend that fixed rate plans have a written policy for when they will recommend changes to the contribution rates and/or benefits. Main disadvantage is recommending something that may be challenging under some governance structures.

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016 Question 11. What are the advantages and disadvantages of the PRB Guidelines recognizing the

different needs of mature plans (e.g. plans with more annuitants than actives) and providing additional

funding considerations for these plans? How would you define mature plans that require special

consideration? What special considerations should be included for mature plans?

35

Respondent Response


Another beauty of the current guidelines is their brevity. This topic would probably not be brief.

Daniel White, GRS

No comment.

Robert Mitchell

If a mature plan is requiring current active members to fund the benefits of annuitants, then the management of the plan has already failed in their obligation.


Special guidance for mature plans can be reflected in guidance on other matters covered in this questionnaire (e.g., length of asset smoothing periods, corridors for asset smoothing periods, length of amortization periods, etc.).


An actuary who is qualified to serve public plans in Texas is qualified to judge what adjustments need to be made in order to recognize special requirements needed by mature plans. Requirements are different from plan to plan. A one-size-fits-all approa

TMRS It does not appear necessary for the PRB to address this topic. TMRS' current funding policy monitors and anticipates the gradual change in the number of annuitants per active member in determining contribution rates.

ERS ERS does not believe plan maturity is an appropriate area to address in the guidelines for open, active plans because the demographics of plans, even when of similar maturity, behave very differently. It may be appropriate for closed plans.

TCDRS This is an area best left to public plan actuaries. Plans of the same maturity are impacted very differently based on plan design and many other factors. It would not be helpful for the PRB to try and define mature plans and what maturity means.


The designation of a “mature plan” would be somewhat arbitrary and special considerations for these types of plans would just be a distraction from a concise set of objective Guidelines for Actuarial Soundness.


The needs of mature plans are different from plan to plan and adjustments are best served by a qualified actuary that recognizes the mature plan's special needs.

COAERS COAERS does not see any advantages to the PRB Guidelines recognizing the different needs of mature plans (e.g. plans with more annuitants than actives) and providing additional funding considerations for these plans.

TRS TRS is not a mature plan; our ratio is 2.4 actives for every retiree. TRS has no opinion on whether mature plans need additional guidelines.

DPFP This is silly, and exactly why the PRB should not provide guidelines. Every plan is different so the guidelines are not helpful.

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016 Question 11. What are the advantages and disadvantages of the PRB Guidelines recognizing the

different needs of mature plans (e.g. plans with more annuitants than actives) and providing additional

funding considerations for these plans? How would you define mature plans that require special

consideration? What special considerations should be included for mature plans?

36


As I have stated earlier in the survey, all plans are different and Guidelines should allow for the differences like mature plans vs plans that are in the early stages.


Special guidance for mature plans can be reflected in guidance on other matters covered in this questionnaire (e.g., length of asset smoothing periods, corridors for asset smoothing periods, length of amortization periods, etc.).


A PRB research or white paper on risk metrics and maturity seems like it might be a more appropriate forum. Committee should consider the current exposure draft of the Pension Risk ASOP.

PRB Guidelines for Actuarial Soundness Survey Results Actuarial Committee Meeting September 15, 2016 Additional Comments

37

Respondent Response


Since the amortization period is usually the best indicator of the health of a public employee defined benefit pension plan, guideline 4 is the key guideline. "Actuarial soundness" is no longer a preferred phrase among most actuaries as it was in 1984. Perhaps the PRB would also consider changing the title of the guidelines to something different, such as "PRB Guidelines for an Adequate Contribution Arrangement."

Daniel White, GRS I stress that any such changes to current guidelines must be consistent with applicable ASOPs.


Most of the mentioned guidance is already in place, so there is no urgent need for the PRB to come up with their own. In fact, if it were contrary to already accepted guidance, it could lead to confusion. EPFPPF does not believe in a A-F rating system. All the information necessary for governmental and reporting agencies to make an intelligent and informed decision can be found in the currently mandated reports and valuations. A letter grade would only sensationalize and over simplify a complex and diverse topic.


The State of Texas oversees its public defined benefit plans as well as or better than any other state in the Union. Texas has developed a consistent, actuarially sound set of Guidelines which have prevented the kinds of plan failures seen in other states. There are a few cases in Texas where plans are in serious trouble. However, these plans are in trouble not because they had insufficient Guidance but because they did not follow existing Guidelines. It is very important to realize that disclosures do not fund pension plans. Contributions and trust fund earnings fund pension plans. This cannot be over emphasized. The number of entities regulating public plans has grown considerably over the last ten years. Each entity seems intent on creating the “one true disclosure” that will cause governmental entities and fund members make sufficient contributions. Experience has shown that there are governmental entities and individuals who cannot be persuaded by any disclosure. The piling on of requirement after requirement has increased the cost of plan administration and actually harmed public pension plan systems. Those who oversee public pension systems should follow the dictum used in medicine: “At least do no harm.”

TMRS TMRS performs annual actuarial valuations; experience studies every four years and periodic peer review actuarial audits. TMRS' strong funding policy conforms with the current PRB guidelines.

ERS

PRB Guideline 4 includes the following comment: “Benefit increases should not be adopted if all plan changes being considered cause a material increase in the amortization period and if the resulting amortization period exceeds 25 years.” ERS would suggest that this guideline be enhanced with commentary about other criteria, like a funded ratio standard or if the plan sponsor wants to do an enhancement but is at or above 25 years – could there be an additional option such as the plan sponsor committing to paying off the accrued liability associated with an enhancement through additional annual contributions, limited to no more than 10 years? Policy and funding


38

ERS (continued) considerations are tricky for benefit enhancements in systems that do not have regular adjustments (particularly when the participants do not receive Social Security, which does offer COLAs).

TCDRS

The responses to the survey are made on behalf of Texas County & District Retirement System. There are many appropriate combinations of assumptions, funding methods and funding policies, some of which haven't been formulated yet. A prescriptive approach by the PRB is limiting and may not be the best approach. For example a plan may want to use a direct rate smoothing technique that results in more conservative funding than a plan following funding guidelines prescribed by the PRB. Plans with the following elements will meet the definition of adequately funded and sustainable plans. Instead of prescribing specific minimum and preferred standards the PRB could recommend the following for all public sector plans. 1. A formal funding policy that sufficiently funds the plans 2. Proof that a plan is following the funding policy 3. Periodic actuarial peer review to ensure that assumptions and methods are reasonable and sufficient, and that the actuarial valuation is accurate. In general the SOA Blue Ribbon Panel should not be considered as an authoritative source of guidance for public sector retirement plans. The panel was composed of a small group of carefully selected individuals that intentionally minimized public sector actuary participation. Any source for actuarial funding recommendations should rely more heavily on public sector actuaries, who are the experts in this area. The CCA PPC White Paper does meet this standard.


In general, as practitioners in this area, we have firsthand knowledge of the wide array of different plan designs, funding policies, and restraints of plan sponsors that exist. The benefit and funding policy should be left up to the stakeholders of the given retirement plan so that the specific goals of that arrangement can be met. We do not believe in a one size fits all approach to funding policies. In addition, Element #4 of the current Guidelines includes a statement that: “Benefit increases should not be adopted if all plan changes being considered cause a material increase in the amortization period and if the resulting amortization period exceeds 25 years.” We would support similar guidance in the updated Guidelines to provide assistance to retirement plans that are considering whether to approve ad hoc benefit increases. We appreciate the opportunity to provide our insights on these questions. We would be happy to provide further commentary on these issues as the PRB works through this important process of setting Guidelines for Actuarial Soundness for public pension plans in the State of Texas.


It is without question that public pension plans have a need to be sound now and into the future. And it cannot be over emphasized that contributions and trust fund earnings are important to that soundness. As attention has been drawn onto pension plans that have fallen short of that soundness, there has been a steady increase of necessary disclosure requirements that have not changed the fundamentals of how plans meet that fund soundness. On the contrary, more time, effort, and costs are now incurred by all pension


39

McAllen Firemen's Relief & Retirement Fund (continued)

plans meeting these "necessary" disclosures. We need to get back to the business of funding the promises made to those that serve and trust in us to provide a retirement that benefits all. I believe each pension plan is unique and best suited to find the best approach to achieving the fund soundness to sustaining its promises. This would require oversight guidelines that do not diminish a plan's means of meeting its funding soundness.

COAERS COAERS would recommend that the PRB consider allowing retirement system’s time to implement any changes made from the current PRB Guidelines for Actuarial Soundness, possibly a two or three actuarial valuation cycle (depending on whether the valuations are performed annually). COAERS believes the following items to be best practices: conducting an actuarial experience study, developing a funding policy, and stress testing. The PRB best serves the State of Texas by working with the retirement system’s and plan sponsors to ensure their actuarial soundness. The PRB Guidelines for Actuarial Soundness are a roadmap to achieve and maintain actuarial soundness, but given that each system’s asset allocation, risk tolerance, and funding situation is unique, the Guidelines work best by establishing a broad framework and by avoiding overly prescriptive language and requirements or diverging from existing national actuarial standards of practice.

DPFP PRB Guidelines for Actuarial Soundness should include items 1 and 5 from the current Guidelines. The other items are obvious and will either be met or they won't be, all plan will have those as a goal regardless of the PRB listing them as Guidelines. The Actuarial Standards of Practice should define the acceptable standards. The PRB should be to report information in a transparent manner where members, citizens and others can understand the information and compare one Plan to another in an easy, clear manner. Perhaps instead of providing Guidelines, in the reporting there could be some indication around each assumption of whether it was conservative, aggressive or more typical so the reader could have a better understanding of the overall if there may be a slant to the results.


Most of our answers refer back to guidance that is already in place, so there is no urgent need for the PRB to come up with their own. In fact, if it were contrary to already accepted guidance, it could lead to confusion.


Recommend the PRB consider recommending a written, comprehensive policy considering benefits, contributions, and investment policies together. Recommend the PRB consider recommending actuarial audits beyond the limited requirements of the Texas Code. Provided a partial start at a set of Guidelines for Sound Pension Management List of items to consider for reporting.

TAB 3

Pension Review Board Actuarial Committee Meeting September 15, 2016

1

PRB Reported Amortization Periods

At its June 20 meeting, the Actuarial Committee requested a report explaining the methods used to calculate the amortization periods of a system’s Unfunded Actuarial Accrued Liability (UAAL) as shown in the PRB Actuarial Valuation and Supplemental Reports. In addition, the committee wanted more information concerning where the reported amortization period may differ from the “effective” amortization period.

PRB Amortization Calculations

The amortization periods included in the PRB Actuarial Valuation and Supplemental Reports rely on the calculations as performed by the system’s actuary and are reviewed for reasonableness by the PRB Staff Actuary and where necessary, the PRB Board Actuary. Any reported period calculated by the PRB staff that deviates from the period calculated by the system actuary is specifically noted in the PRB Reports. All PRB reported amortization periods are based on a system’s contribution policy and relevant Actuarial Standards of Practice (ASOPs). In addition, the calculations take into account whether actual contributions differ from the stated contribution policy.

The amortization calculations are classified into the 3 primary categories explained below, as well as further delineated on a level dollar or a level percent of payroll approach. The 3 primary categories are:

1) Closed – The annual amortization payment towards the UAAL is an actuarially determined rate using a fixed amortization schedule based on a specified starting date such that the amortization period decreases by one each subsequent year. Under this approach, the actual contributions are expected to fluctuate with changes in the UAAL to maintain the stated amortization schedule.

2) Open/Rolling – The annual amortization payment towards the UAAL is an actuarially determined rate using a constant amortization period from one year to the next. Under this approach, the reported amortization period assumes this is a fixed amortization schedule (similar to the closed approach) and does not take into account the contribution policy that states actual future contributions will be based on resetting the amortization period back to the original period.

3) Recalculated – For systems that are contributing based on a fixed contribution rate, utilize a layered amortization approach, are an aggregation of multiple employer systems with varying amortization periods, or whose actual contributions differ from their stated actuarially determined rate, the reported amortization period is recalculated each year.

Effective Amortization Period Definition

Based on the current methodology used by staff to calculate an effective amortization period for certain systems, discussion of this topic during the committee meeting, and the requirement in Texas Government Code §§802.2015 and 802.2016 to take into account “actual contributions” for determining the need for a Funding Soundness Restoration Plan (FSRP), the staff has included the following proposed definition of effective amortization period to be considered by the committee:

“The effective amortization period shall be calculated using actual expected contributions, taking into account the contribution policy of the plan and any relevant laws and/or agreements associated with those contributions.”

Effective Amortization Period Calculation

Based on the proposed definition provided above, the staff has determined that systems that utilize the open/rolling amortization method in some manner as part of their reported amortization period are likely to have an effective amortization period that differs from the reported period. The exception is any plan that is currently in a surplus position and has therefore been reported with a 0 year amortization period.

The following examples illustrate the calculation of the effective amortization period for a fixed rate contribution plan, a plan using a closed amortization period and a plan using an open/rolling amortization period. This illustrates why the effective amortization period may differ from the reported amortization period for systems that use an open/rolling amortization method. All calculations assume annual, end-of-year payments, assumed discount rate of 7.00%, assumed payroll growth of 3.00% and a minimum amortization payment equal to no less than 50% of the initial year’s amortization payment.


2

EXAMPLE 1 Amortization Period: 10 Years

Open Level % of Payroll

Year UAAL Interest Accrual

Annuity Factor

Am Pmt

1 100,000 7,000 0.12258 12,258

2 94,742 6,632 0.12258 11,613

3 89,761 6,283 0.12258 11,003

… … … … 25 7,561 529 0.12258 6,129

1

26 1,961 137 0.12258 2,098

27 0 0 0 1Payment is limited to 50% of initial am pmt.

Closed Level % of Payroll


Annuity Factor

Am Pmt

1 100,000 7,000 0.12258 12,258

2 94,742 6,632 0.13378 12,675

3 88,699 6,209 0.14781 13,111

… … … … 9 31,110 2,178 0.52931 16,467

10 16,821 1,177 N/A 17,998

11 0 0 N/A 0

Fixed 10% of Payroll (not including NC)


Covered Payroll

Am Pmt

1 100,000 7,000 130,000 13,000

2 94,000 6,580 133,900 13,390

3 87,190 6,103 137,917 13,792

… … … … 9 25,106 1,757 164,682 16,468

10 10,395 728 169,622 11,123

11 0 0 N/A 0

EXAMPLE 2 Amortization Period: 30 Years

Open Level % of Payroll


Annuity Factor

Am Pmt

1 100,000 7,000 0.05701 5,701

2 101,299 7,091 0.05701 5,776

3 102,614 7,183 0.05701 5,851

… … … … 98 349,547 24,468 0.05701 19,929

99 354,086 24,786 0.05701 20,188

100 358,684 25,108 0.05701 20,450

Closed Level % of Payroll


Annuity Factor

Am Pmt

1 100,000 7,000 0.05701 5,701

2 101,299 7,091 0.05807 5,882

3 102,508 7,176 0.05921 6,069

… … … … 29 27,372 1,916 0.52931 14,488

30 14,800 1,036 N/A 15,836

31 0 0 N/A 0

Fixed 10% of Payroll (not including NC)


Annuity Factor

Am Pmt

1 100,000 7,000 59,000 5,900

2 101,100 7,077 60,770 6,077

3 102,100 7,147 62,593 6,259

… … … … 29 21,650 1,515 134,988 13,499

30 9,666 677 139,038 10,343

31 0 0 N/A 0

See Table 1 for a list of plans where the effective amortization period as calculated under the proposed method is expected to differ from the current reported period.


3

Table 1

Plan Name

Reporting Amortization

Method

Assumed Interest

Rate

Assumed Payroll Growth

Rate UAAL ($'s)

Reported Amortization

Period

Capital MTA Admin Level $ Rolling 7.00% N/A 4,584,331 20

CPS of San Antonio Level $ Rolling 7.50% N/A 263,610,957 30

Dallas Employees Level %

Recalculated* 8.00% 3.00% 763,002,000 50

Dallas Police & Fire Supplemental Level % Rolling 7.25% 2.75% 20,471,488 10

Galveston Wharves Level $ Rolling 7.50% N/A 2,478,716 30

Houston Fire Level % Rolling 8.50% 3.00% 532,645,292 30

Northeast Medical Center Hospital Level $ Rolling 7.50% N/A 1,855,814 10

Physicians Referral Service Level % Rolling 7.50% 3.25% 173,535,891 15

University Health System Level % Rolling 7.50% 4.00% 75,528,555 30 * Reported amortization period estimated by PRB assuming the pension obligation bond is fully paid in 2035 and the plan

transitions to a 30 Year Rolling Level % of Payroll contribution rate thereafter.

THIS PAGE INTENTIONALLY LEFT BLANK


1

ACTUARIAL ASSUMPTIONS SUMMARY FOR TEXAS PUBLIC RETIREMENT SYSTEMS

INTRODUCTION

Average annual retirement system funding should satisfy the following equation, C + I = B + E or Contributions (C) + Income (I) = Benefits (B) + Expenses (E). Under this funding equation, employers and employees contribute to a retirement system in regular intervals. The system invests these contributions and earns a return on that investment. Return from investments (fixed income, equity, mutual fund, etc.) are included in income. Contributions (C) and income (I) combine to add to the system’s trust fund. Retirement systems pay benefits (B) to members who have met plan requirements. Retirement systems also pay expenses (E), including investment related and administrative expenses, necessary for maintaining the system. Benefit payments and expenses combine to deplete the retirement system’s trust fund.

For some systems, the exact contribution rate or a minimum rate may be set in statute; while for others, the contribution rate is determined by or can be changed by the city council, board of trustees, or plan members. To ensure long-term system viability, sponsors contribute money to the trust fund that is sufficient to fund the system benefit obligations over a reasonable period of time. Per the Pension Review Board’s (PRB’s) Guidelines for Actuarial Soundness, annual contributions should be adequate to amortize projected benefit obligations over a period not to exceed 40 years, with 15 - 25 years being a more preferable target.

To determine the annual contributions necessary to amortize pension obligations over a reasonable time period, actuarial methods and assumptions are used to calculate the present value of benefit obligations (i.e. future liabilities). Actuaries include in the calculation earnings from invested assets, employee contributions, and plan demographic changes over time. Actuaries then determine the recommended employer contribution necessary to amortize the long-term pension benefit liability. To ensure retirement system solvency, recommended contributions should be fully funded over the long-term.

ACTUARIAL ASSUMPTIONS

Actuarial methods and assumptions, combined with participant data and the plan benefit design, are used to value current and future benefit obligations. Retirement systems select actuarial assumptions, with guidance from the actuary. Actuarial assumptions for pension plans can be categorized as economic and demographic assumptions.

• Economic assumptions pertain to interest rates used to discount plan liabilities, salary increases for plan participants, and expected investment return and inflation rates.

• Demographic assumptions include plan participant rates of retirement, turnover or withdrawal rates, rates of disability, and mortality rates.

The PRB Guidelines for Actuarial Soundness state that actuarial assumptions should be reasonable and realistic in the aggregate.


2

INVESTMENT RETURN ASSUMPTION

The investment return assumption is the long-term expected rate of return on pension system assets. The assumed rate of return is generally used by system actuaries to discount future pension obligations to determine the recommended contributions for adequate system funding. If the actual returns do not meet or exceed the assumed returns, then the actuarially determined recommended contributions would not be adequate to ensure system sustainability in the long-term. A summary of the return assumptions for Texas public retirement systems is included in the following table.

Investment Return Assumptions

Return Assumption Percent of Plans Running Total

5.50% 1% 1%

6.50% 1% 2%

6.75% 3% 5%

7.00% 12% 17%

7.25% 8% 25%

7.50% 20% 45%

7.70% 1% 46%

7.75% 17% 63%

7.90% 3% 66%

8.00% 29% 95%

8.25% 4% 99%

8.50% 1% 100%

INFLATION ASSUMPTION

Inflation is the rate at which price levels are rising, and purchasing power is falling. The assumed rate of inflation is included as a component of the assumed rate of return and the assumed plan participant salary increases. It is also used to value cost-of-living adjustment (COLA) benefit increases for pension systems that have COLAs tied to inflation. A summary of assumed rates of inflation for Texas public retirement systems is presented in the following table.

Inflation Rate Assumptions

Inflation Assumption Percent of Plans Running Total

0.00% 2% 2%

2.25% 1% 3%

2.50% 15% 18%

2.75% 3% 21%

3.00% 40% 61%

3.25% 5% 66%

3.50% 25% 91%

3.75% 3% 94%

4.00% 3% 97%

N/A 3% 100%


3

ACTUARIAL COST METHODS

The valuation of future benefits is calculated using actuarial cost methods. Currently, Texas retirement system actuaries use one of the following five valuation methodologies.

Entry Age Normal (EAN) - This methodology projects the benefit costs of each individual from entry age into the plan to assumed exit age from the plan. This benefit liability is allocated on a level basis over the earnings or service of the individual. Relative to other actuarial cost methods, entry age normal tends to produce more stable, predictable contribution rates. EAN is the most common cost method used by Texas public plans.

Ultimate EAN – This methodology is used for plans that have different tiers of benefits based on date of hire. Under Ultimate EAN, the plan benefit liability is calculated by assuming each plan participant is a member of the most recently added plan tier. (Note: alternate variations of this cost method are also used.)

Projected Unit Credit (PUC) - Unlike EAN, PUC does not calculate benefits on a level basis over the earnings service of the individual. Under the PUC methodology, annual benefit costs for each member increase as the member approaches retirement age.

Traditional Unit Credit (UC) - This methodology is appropriate for plans with benefits that are based on dollar amounts rather than percentages of pay, for frozen plans, or for plans with no active members. The UC methodology calculates the Actuarial Accrued Liability based on current pay and service, not future pay. Using this methodology, the annual cost attributable to benefit liabilities for each member (normal cost) increases significantly as the members approach retirement age.

Aggregate – Under this methodology, the actuarial accrued liability is set equal to the actuarial value of assets and the excess of the present value of projected benefits over the value of plan assets is allocated on a level basis over the future service lives of the plan participants. The portion of the allocation attributed to the current year is included as plan annual benefit cost (normal cost).

The following table summarizes Texas public retirement system plan cost methodology use.

Cost Methodologies

Cost Method Percent of Plans

Entry Age Normal 87%

Ultimate EAN 4%

Projected Unit Credit 5%

Traditional Unit Credit 2%

Aggregate 1%

Total* 100% *Individual amounts may not sum to 100% due to rounding


4

ASSET VALUATION METHODS

The Market Value of Assets (MVA) is the current value of plan assets if they were sold on the valuation date. The Actuarial Value of Assets (AVA) is used for actuarial valuation and could be the MVA or a smoothed value. A smoothed value phases in gains and losses to reduce calculated recommended contribution volatility associated with the use of market value. This increases recommended contribution stability and predictability. This following table summarizes the asset valuation methodologies used by Texas public retirement systems.

Asset Valuation Methodologies

Valuation Method Percent of Plans

5-Year Smoothing 73%

Market Value (MVA) 16%

10-Year Smoothing 1%

4-Year Smoothing 1%

3-Year Smoothing 2%

Other 6%


AMORTIZATION METHODS AND PERIODS

The amortization period is the amount of time expected to fully fund the unfunded accrued liability based on the expected future contributions to the plan.

The annual payments can be calculated using either the Level Dollar or Level Percent of Payroll method.

Level Dollar – Assumes pension payments are a level dollar amount over the amortization period.

Level Percentage – Assumes the pension payments are a level percentage of payroll and are scheduled to increase at the payroll growth assumption annually.

The length of the amortization period is reported by Texas public retirement systems using the following approaches:

Open/Rolling – The calculated contribution rate is determined by resetting the amortization period each year. However, the reported amortization period assumes all future contributions are made at the current rate.

Closed – The calculated contribution rate is determined by using a fixed period such that the amortization period decreases by one each year.

Recalculated – For plans with a fixed contribution rate, actual contributions that differ from an actuarially determined rate or that use a layered amortization approach the effective amortization period is recalculated each year.


5

The following table summarizes the amortization period calculation methods used by Texas public retirement systems.

Amortization Methodologies

Amortization Method Percent of Plans

Level percent open/rolling 8%

Level dollar open/rolling 5%

Level percent recalculated 69%

Level dollar recalculated 5%

Level percent closed 5%

Level dollar closed 8%


PAYROLL GROWTH ASSUMPTION

A payroll growth assumption is used for plans whose amortization method is a level % (closed, open or recalculated). Because a level percentage of payroll amortization payment is expected to increase at the payroll growth assumption, a higher payroll growth assumption lowers the required contribution (and defers plan funding). The following table shows the percentage of Texas public retirement systems that use various payroll growth assumptions.

Current Payroll Growth Assumptions

Payroll Growth Assumption

Percent of Systems

Running Total

2.50% 3% 3%

2.75% 4% 7%

3.00% 12% 19%

3.25% 7% 26%

3.50% 32% 58%

3.75% 5% 63%

4.00% 25% 88%

4.25% 3% 91%

4.50% 8% 99%

5.00% 1% 100%


1

Policy for Determination of System Actuarial Review (Adopted May 5, 2016)

1. In accordance with Government Code, Section 801.202, the Pension Review Board (PRB or

Board) staff will review all actuarial reports submitted by public retirement systems. Staff will

determine whether or not the public retirement system’s actuarial valuation (“Valuation”)

shows that the system’s actual contributions are sufficient to amortize the unfunded actuarial

accrued liability within 40 years, as specified in Texas Government Code, Sections 802.2015 and

802.2016. As part of its review of a system's actuarial reports, the PRB staff may calculate an

amortization period that is different from what is reported in the Valuation.

2. If the staff determines a system’s actual contributions are not sufficient to amortize the

unfunded actuarial accrued liability within 40 years (“Over-40-Year-Amortization-

Determination”), the executive director will notify the Board.

3. If the Board actuary concurs with the Over-40-Year-Amortization-Determination, the executive

director will notify the system of this determination in writing and provide the system a 30-day

period in which to voluntarily respond to staff. If the PRB does not receive any response from

the system within the designated time period, the system’s Over-40-Year-Amortization-

Determination will be confirmed. The system will also be informed of the requirement that the

system provide its associated governmental entity the notice required under Sections

802.2015(c) and 802.2016(c) of the Texas Government Code.

4. If the system in its response, if any, does not agree with staff’s Over-40-Year-Amortization-

Determination, the staff will present staff’s review and the system’s response to the Board’s

actuarial committee. The actuarial committee will confirm, deny, or amend the staff’s Over-40-

Year-Amortization-Determination and will recommend its findings to the Board. The Board will

make the final decision regarding the Over-40-Year-Amortization-Determination. The Board’s

decision and the system’s disagreement, if any, will be included in the PRB’s actuarial and

financial reports and in the funding soundness restoration plan (FSRP) lists staff presents at each

PRB meeting.

5. A system with a confirmed Over-40-Year-Amortization-Determination will be placed under staff

review for further risk assessment. The staff will notify the system and the Board in advance of

the review to provide the system with details of the review, including the scope and time period

2

of the review. The executive director will report preliminary findings to the Board’s actuarial

committee.

6. If a system receives a confirmed Over-40-Year-Amortization-Determination based on three

consecutive annual Valuations, or two consecutive Valuations for a system that conducts the

Valuations every two or three years, the executive director will notify the system and its

associated governmental entity regarding the statutory requirement to formulate an FSRP in

accordance with Texas Government Code Section 802.2015.1

7. At each PRB meeting, staff will provide a list of systems subject to the FSRP formulation

requirement. The staff will also provide a list of systems that are at risk of becoming subject to

the requirement because the system has a confirmed Over-40-Year-Amortization-

Determination, based on the most recent Valuation.

8. The Board may refer a system that is subject to the FSRP formulation requirement to be placed

under the review of the Board’s actuarial committee. If a system is referred as such, the findings

and recommendations of the staff review will be presented at the next meeting of the

committee. The system and its associated governmental entity will be notified in writing no later

than seven (7) days prior to the committee meeting and may be asked to appear before the

committee.

9. Upon the recommendation of the committee, the Board may ask a system and its associated

governmental entity to appear at a regularly scheduled meeting of the PRB. If such

recommendation is made, the entities will be notified in writing no later than ten (10) business

days prior to such meeting.

1 Texas Government Code Section 802.2016, concerning the Funding Soundness Restoration Plan for Certain Public

Retirement Systems, has similar requirements to Section 802.2015 and applies only to a public retirement system that is governed by Article 6243i, Revised Statutes.


Actuarial Valuation Report

August 4, 2016

Plan Name

Plan Status

(1)

Effective

Date

Current

Amort

Period

Funded

Ratio

Actuarial Value

of Assets

Unfunded Actuarial

Accrued Liability

(UAAL) Effective Date

Prior Amort

Period

Funded

Ratio

Actuarial Value of

Assets

Unfunded Actuarial

Accrued Liability

(UAAL)

Dallas Police and Fire Pension System-Combined Plan Active 1/1/2015 Infinite 63.80% 3,695,273,876$ 2,096,942,149$ 1/1/2014 26.0 75.59% 3,877,321,261$ 1,251,874,626$

Law Enforcement and Custodial Officer Sup. Ret. Fund Active 8/31/2015 Infinite 72.03% 909,249,614$ 353,061,775$ 8/31/2014 Infinite 73.22% 883,594,932$ 323,174,989$

Judicial Retirement System of Texas Plan Two Active 8/31/2015 Infinite 92.23% 372,615,005$ 31,395,567$ 8/31/2014 Infinite 90.20% 348,430,575$ 37,855,797$

Odessa Firemen's Relief & Retirement Fund Active 1/1/2015 Infinite 49.75% 48,590,592$ 49,086,550$ 1/1/2013 Infinite 48.82% 42,756,974$ 44,828,726$

Wichita Falls Firemen's Relief and Retirement Fund Active 1/1/2015 105.9 65.24% 47,133,894$ 25,117,876$ 12/31/2012 63.2 63.00% 41,964,674$ 24,641,489$

Fort Worth Employees Retirement Fund Active 12/31/2015 72.5 60.65% 2,154,874,311$ 1,398,326,670$ 12/31/2014 55.7 62.23% 2,094,381,418$ 1,271,153,104$

Greenville Firemen's Relief and Retirement Fund Active 12/31/2014 70.4 48.94% 13,440,264$ 14,021,709$ 12/31/2012 Infinite 47.44% 12,201,104$ 13,516,305$

Harlingen Firemen's Relief and Retirement Fund Active 12/31/2013 66.6 70.98% 28,343,328$ 11,586,999$ 12/31/2011 Infinite 65.07% 22,270,694$ 11,953,301$

Irving Firemen's Relief and Retirement Fund (2) Active 1/1/2014 63.4 73.10% 156,223,428$ 57,502,156$ 1/1/2012 Infinite 67.40% 134,886,668$ 65,253,147$

Midland Firemen's Relief and Retirement Fund Active 1/1/2014 59.1 66.82% 78,481,491$ 38,963,054$ 1/1/2012 86.3 72.23% 73,066,776$ 28,091,967$

Sweetwater Firemen's Relief and Retirement Fund Active 12/31/2014 58.8 69.01% 8,180,692$ 3,674,028$ 12/31/2012 Infinite 69.52% 7,217,289$ 3,163,694$

Orange Firemen's Relief and Retirement Fund Active 1/1/2015 58.2 57.41% 9,383,309$ 6,961,980$ 12/31/2012 82.3 57.25% 8,766,374$ 6,544,945$

Galveston Employees Retirement Plan for Police Active 1/1/2014 55.1 44.34% 22,028,282$ 27,657,453$ 1/1/2013 65.8 43.03% 21,472,997$ 28,426,840$

University Park Firemen's Relief and Retirement Fund Active 1/1/2015 53.7 45.83% 9,440,082$ 11,158,279$ 12/31/2012 81.3 44.26% 8,556,364$ 10,776,761$

Galveston Firefighter's Relief & Retirement Fund Active 1/1/2014 50.2 69.65% 39,591,204$ 17,248,638$ 1/1/2012 42.8 68.87% 37,288,602$ 16,858,357$

Dallas Employees' Retirement Fund (3) Active 12/31/2014 50.0 80.94% 3,241,053,000$ 763,002,000$ 12/31/2013 51.0 85.14% 3,074,284,000$ 536,561,000$

Marshall Firemen's Relief and Retirement Fund Active 12/31/2014 43.2 46.39% 8,003,545$ 9,249,845$ 12/31/2012 38.6 44.18% 6,990,904$ 8,832,086$

Longview Firemen's Relief and Retirement Fund Active 12/31/2014 41.4 53.73% 45,224,598$ 38,949,902$ 12/31/2013 63.3 56.22% 46,326,150$ 36,075,623$

San Angelo Firemen's Relief and Retirement Fund Active 12/31/2013 40.9 65.01% 54,227,452$ 29,189,521$ 12/31/2011 49.0 64.89% 49,895,449$ 26,994,448$

Lufkin Firemen's Relief and Retirement Fund Active 12/31/2014 40.6 43.51% 14,203,277$ 18,437,274$ 12/31/2012 89.6 38.81% 11,265,138$ 17,762,521$

Beaumont Firemen's Relief and Retirement Fund Active 12/31/2014 39.1 72.72% 105,072,038$ 39,407,909$ 12/31/2012 49.6 68.25% 92,033,413$ 42,804,466$

Conroe Fire Fighters' Retirement Fund Active 12/31/2013 37.4 61.77% 18,126,626$ 11,217,721$ 12/31/2011 38.2 60.58% 15,392,762$ 10,016,819$

Brownwood Firemen's Relief and Retirement Fund Active 12/31/2013 37.0 43.76% 3,292,135$ 4,230,639$ 12/31/2011 31.8 39.91% 2,848,174$ 4,289,003$

Atlanta Firemen's Relief and Retirement Fund Active 12/31/2014 36.2 81.87% 3,549,153$ 785,889$ 12/31/2012 Infinite 73.10% 2,988,348$ 1,099,539$

Teacher Retirement System of Texas Active 8/31/2015 33.3 80.19% 133,485,187,642$ 32,967,736,862$ 8/31/2014 29.8 80.23% 128,397,777,855$ 31,637,822,971$

Employees Retirement System of Texas Active 8/31/2015 33.0 76.33% 25,850,542,024$ 8,017,817,926$ 8/31/2014 Infinite 77.24% 25,431,922,496$ 7,492,814,715$

Houston Municipal Employees Pension System (4) Active 7/1/2015 32.0 54.19% 2,582,510,000$ 2,183,209,000$ 7/1/2014 33.0 58.07% 2,490,521,000$ 1,798,058,000$

El Paso Police Pension Fund Active 1/1/2014 32.0 78.23% 696,437,201$ 193,755,713$ 1/1/2012 Infinite 78.21% 626,346,104$ 174,514,074$

Texas City Firemen's Relief and Retirement Fund Active 12/31/2014 31.6 54.39% 16,274,374$ 13,646,051$ 12/31/2012 33.6 52.95% 14,859,762$ 13,203,613$

Abilene Firemen's Relief and Retirement Fund Active 10/1/2015 31.5 56.60% 56,624,807$ 43,412,430$ 10/1/2013 33.5 57.49% 52,920,100$ 39,134,330$

Plainview Firemen's Relief and Retirement Fund Active 12/31/2013 31.4 39.00% 5,262,382$ 8,230,821$ 12/31/2011 35.2 39.13% 4,969,795$ 7,729,513$

Big Spring Firemen's Relief and Retirement Fund Active 1/1/2013 30.8 56.73% 9,889,540$ 7,544,372$ 1/1/2012 27.0 61.35% 11,133,176$ 7,015,196$

Houston Firefighter's Relief and Retirement Fund Active 7/1/2013 30.0 86.56% 3,430,436,708$ 532,645,292$ 7/1/2012 30.0 86.95% 3,263,265,000$ 489,642,000$

City Public Service of San Antonio Pension Plan Active 1/1/2015 30.0 84.19% 1,403,534,394$ 263,610,957$ 1/1/2014 30.0 83.41% 1,318,882,760$ 262,309,746$

University Health System Pension Plan Active 1/1/2013 30.0 73.16% 205,905,204$ 75,528,555$ 1/1/2012 30.0 71.00% 183,349,789$ 74,903,587$

Port of Houston Authority Retirement Plan Closed 8/1/2015 30.0 97.45% 166,856,925$ 4,366,742$ 8/1/2014 0.0 104.44% 164,815,227$ (7,001,367)$

DART Employees' Defined Benefit Retirement Plan Closed 10/1/2014 30.0 74.27% 150,995,597$ 52,316,186$ 10/1/2013 30.0 70.73% 142,663,799$ 59,041,946$

Texas Emergency Services Retirement System Active 8/31/2014 30.0 76.25% 83,761,038$ 26,093,761$ 8/31/2012 Infinite 66.75% 67,987,487$ 33,868,555$

Galveston Wharves Pension Plan Frozen 1/1/2015 30.0 82.91% 12,023,524$ 2,478,716$ 1/1/2014 30.0 81.85% 11,492,112$ 2,547,577$

Judicial Retirement System of Texas Plan One (5) Closed 8/31/2015 30.0 0.00% -$ 223,170,656$ 8/31/2014 30.0 0.00% -$ 245,474,274$

Laredo Firefighters Retirement System Active 9/30/2014 29.8 59.72% 116,056,855$ 78,288,944$ 9/30/2012 29.8 54.07% 95,140,202$ 80,817,630$

Killeen Firemen's Relief and Retirement Fund Active 9/30/2014 29.5 66.46% 32,604,554$ 16,451,960$ 9/30/2012 36.1 66.91% 27,528,834$ 13,613,668$

Denison Firemen's Relief and Retirement Fund Active 1/1/2014 29.1 71.60% 14,577,695$ 5,781,089$ 1/1/2012 23.9 71.13% 13,680,826$ 5,552,667$

Current Actuarial Valuation Prior Actuarial Valuation

This report is a compilation of pension data reported by retirement systems in their most recent AVs, sorted by amortization period.

1


August 4, 2016

Plan Name

Plan Status

(1)

Effective

Date

Current

Amort

Period

Funded

Ratio

Actuarial Value

of Assets

Unfunded Actuarial

Accrued Liability


Prior Amort

Period

Funded

Ratio

Actuarial Value of

Assets

Unfunded Actuarial

Accrued Liability

(UAAL)


Dallas Co. Hospital Dist. Retirement Income Plan Active 1/1/2015 29.0 76.35% 749,980,945$ 232,292,503$ 1/1/2014 30.0 82.53% 670,795,379$ 141,985,488$

McAllen Firemen's Relief and Retirement Fund Active 10/1/2014 29.0 70.79% 44,684,917$ 18,439,743$ 9/30/2012 43.9 66.14% 37,841,858$ 19,360,417$

Amarillo Firemen's Relief and Retirement Fund Active 1/1/2014 28.8 82.98% 132,542,271$ 27,185,733$ 1/1/2012 41.0 78.19% 120,396,531$ 33,581,721$

Austin Police Officers' Retirement Fund Active 12/31/2014 28.6 67.45% 653,192,335$ 315,148,059$ 12/31/2013 28.9 66.39% 604,841,897$ 306,202,257$

Houston MTA Workers Union Pension Plan Closed 1/1/2015 28.0 63.70% 223,969,107$ 127,638,219$ 1/1/2014 29.0 73.60% 206,052,122$ 73,907,003$

Houston MTA Non-Union Pension Plan Active 1/1/2015 28.0 66.88% 142,619,248$ 70,631,029$ 1/1/2014 29.0 80.17% 129,398,834$ 31,999,600$

Lubbock Fire Pension Fund Active 1/1/2015 27.6 75.53% 186,077,176$ 60,285,672$ 1/1/2013 24.3 74.50% 161,745,303$ 55,358,443$

Cleburne Firemen's Relief and Retirement Fund Active 12/31/2014 27.3 65.30% 20,349,833$ 10,815,772$ 12/31/2012 34.1 57.36% 16,293,411$ 12,110,818$

San Antonio Metro. Transit Retirement Plan (VIA) Active 10/1/2014 27.0 59.22% 210,446,812$ 144,941,124$ 10/1/2013 28.0 56.97% 192,730,010$ 145,599,001$

Paris Firefighters' Relief and Retirement Fund Active 12/31/2014 26.1 42.74% 5,980,762$ 8,011,136$ 1/1/2013 29.2 44.94% 6,111,951$ 7,488,349$

Irving Supplemental Benefit Plan Active 1/1/2015 25.0 80.94% 51,244,241$ 12,069,248$ 1/1/2014 27.2 78.88% 47,689,367$ 12,768,984$

Waxahachie Firemen's Relief and Retirement Fund Active 10/1/2014 24.3 68.91% 13,717,245$ 6,189,974$ 10/1/2012 19.8 64.48% 10,462,784$ 5,763,840$

Corsicana Firemen's Relief and Retirement Fund Active 12/31/2014 24.2 53.54% 8,427,052$ 7,313,979$ 12/31/2012 28.6 47.90% 6,956,513$ 7,567,902$

Austin Employees' Retirement Fund Active 12/31/2014 24.0 70.91% 2,193,881,221$ 900,174,491$ 12/31/2013 26.0 70.38% 2,047,929,504$ 861,988,246$

Denton Firemen's Relief and Retirement Fund Active 12/31/2013 24.0 77.14% 62,089,743$ 18,400,951$ 12/31/2011 31.7 72.01% 54,169,459$ 21,059,268$

Capital Metro Retirement Plan for Bargaining Units Frozen 1/1/2015 24.0 46.62% 27,913,393$ 31,961,211$ 1/1/2014 25.0 44.08% 26,656,933$ 33,810,946$

Corpus Christi Fire Fighters' Retirement System Active 12/31/2014 23.1 61.36% 126,273,629$ 79,515,975$ 12/31/2012 26.7 55.00% 105,753,324$ 86,516,036$

Houston Police Officers Pension System Active 7/1/2015 23.0 79.75% 4,550,620,000$ 1,155,510,000$ 7/1/2014 23.0 80.96% 4,342,936,000$ 1,021,056,000$

El Paso Firemen's Pension Fund Active 1/1/2014 23.0 80.69% 479,228,995$ 114,707,333$ 1/1/2012 76.0 79.88% 431,209,946$ 108,582,531$

Temple Firemen's Relief and Retirement Fund Active 9/30/2014 23.0 77.17% 39,056,649$ 11,556,686$ 9/30/2012 30.8 76.19% 34,400,736$ 10,747,775$

Tyler Firemen's Relief and Retirement Fund Active 12/31/2013 22.9 73.61% 56,547,675$ 20,275,644$ 12/31/2011 34.0 69.85% 49,221,368$ 21,250,910$

Lower Colorado River Auth. Retirement Plan and Trust Closed 4/1/2015 22.0 79.49% 411,596,334$ 106,185,580$ 4/1/2014 23.0 74.69% 382,104,178$ 129,476,094$

San Benito Firemen's Pension Fund Active 12/31/2013 21.7 60.81% 3,216,957$ 2,072,788$ 12/31/2011 14.8 59.47% 2,523,198$ 1,719,561$

Texas Municipal Retirement System (6) Active 12/31/2015 20.6 85.79% 24,347,200,578$ 4,031,152,205$ 12/31/2014 20.9 85.79% 22,860,980,042$ 3,786,487,135$

Nacogdoches County Hosp. District Retirement Plan Active 7/1/2013 20.0 80.37% 37,500,063$ 9,158,453$ 7/1/2011 27.8 54.77% 28,293,893$ 23,368,461$

Capital Metro Retirement Plan for Admin Employees Active 1/1/2015 20.0 80.76% 19,247,210$ 4,584,331$ 1/1/2014 20.0 75.59% 16,883,852$ 5,450,798$

Texarkana Firemen's Relief and Retirement Fund Active 12/31/2013 19.6 84.62% 30,058,082$ 5,461,083$ 12/31/2011 20.0 82.87% 26,721,817$ 5,524,986$

Harris County Hospital District Pension Plan (7) Closed 1/1/2016 19.1 70.24% 579,800,249$ 245,665,910$ 1/1/2016 20.0 69.78% 549,765,739$ 238,108,304$

Dallas/Ft. Worth Airport Board Retirement Plan Active 1/1/2016 19.0 78.26% 422,736,569$ 117,433,754$ 1/1/2015 20.0 81.27% 401,624,341$ 92,547,970$

Dallas/Ft. Worth Airport Board DPS Retirement Plan Active 1/1/2016 19.0 74.83% 152,273,098$ 51,209,492$ 1/1/2015 20.0 76.12% 142,225,564$ 44,607,419$

Port Arthur Firemen's Relief and Retirement Fund Active 1/1/2014 17.0 77.40% 40,754,274$ 11,900,986$ 1/1/2012 22.5 72.76% 36,116,894$ 13,522,937$

Brazos River Authority Retirement Plan Frozen 3/1/2015 17.0 71.25% 21,358,481$ 8,618,040$ 3/1/2014 18.0 73.75% 20,626,849$ 7,343,589$

Weslaco Firemen's Relief and Retirement Fund Active 9/30/2014 15.9 69.23% 8,355,918$ 3,714,087$ 9/30/2012 26.8 63.33% 6,985,491$ 4,045,275$

Physicians Referral Service Retirement Benefit Plan Active 9/1/2015 15.0 70.45% 413,700,959$ 173,535,891$ 9/1/2014 15.0 69.56% 394,783,900$ 172,775,853$

Galveston Employees' Retirement Fund Active 12/31/2015 13.7 78.01% 45,784,122$ 12,905,194$ 1/1/2015 31.5 79.50% 46,071,101$ 11,881,160$

San Antonio Fire and Police Pension Fund Active 10/1/2015 11.1 88.82% 2,858,461,847$ 359,920,963$ 10/1/2014 6.2 92.91% 2,752,286,963$ 209,951,480$

El Paso City Employees' Pension Fund Active 9/1/2014 11.0 77.12% 663,063,411$ 196,681,524$ 9/1/2013 17.0 73.76% 608,509,997$ 216,517,008$

Corpus Christi Regional Transportation Authority Active 1/1/2013 11.0 91.49% 25,566,845$ 2,377,297$ 1/1/2012 12.0 85.20% 21,791,159$ 3,785,266$

Austin Fire Fighters Relief and Retirement Fund Active 12/31/2014 10.6 90.93% 789,433,224$ 78,713,151$ 12/31/2013 10.5 91.75% 742,073,494$ 66,697,659$

Dallas Police and Fire Pension System-Supp Active 1/1/2015 10.0 51.15% 21,438,870$ 20,471,488$ 1/1/2014 10.0 61.99% 24,036,845$ 14,740,169$

Northeast Medical Center Hospital Retirement Plan Frozen 7/1/2015 10.0 84.15% 9,853,521$ 1,855,814$ 7/1/2014 10.0 87.19% 10,250,508$ 1,505,421$

Colorado River Municipal Water Dist. Pension Trust (7) Active 1/1/2016 9.4 93.52% 9,173,226$ 635,852$ 1/1/2015 10.0 96.51% 10,285,251$ 371,497$

Texas County & District Retirement System (8) Active 12/31/2014 9.2 90.47% 23,751,821,185$ 2,501,030,760$ 12/31/2013 10.8 89.39% 21,912,711,318$ 2,602,095,366$


2


August 4, 2016

Plan Name

Plan Status

(1)

Effective

Date

Current

Amort

Period

Funded

Ratio

Actuarial Value

of Assets

Unfunded Actuarial

Accrued Liability


Prior Amort

Period

Funded

Ratio

Actuarial Value of

Assets

Unfunded Actuarial

Accrued Liability

(UAAL)


Guadalupe-Blanco River Authority Closed 1/1/2015 7.9 86.34% 25,587,452$ 4,049,661$ 1/1/2014 9.6 83.41% 22,736,935$ 4,522,243$

Northwest Texas Healthcare System Retirement Plan Frozen 10/1/2013 7.4 61.40% 17,736,458$ 11,149,150$ 10/1/2012 9.2 58.50% 17,190,249$ 12,194,877$

Travis Cty ESD #6 Firemen's Relief & Retirement Fund Active 1/1/2014 7.3 62.98% 7,554,521$ 4,441,508$ 1/1/2012 14.9 36.75% 3,877,699$ 6,673,272$

Plano Retirement Security Plan Active 12/31/2013 0.0 100.27% 100,876,901$ (271,930)$ 12/31/2011 23.0 97.15% 84,500,525$ 2,478,252$

The Woodlands Firefighters' Retirement System Active 1/1/2016 0.0 100.46% 22,184,111$ (101,928)$ N/A N/A N/A N/A N/A

Arlington Employees Deferred Income Plan Active 7/1/2015 0.0 116.01% 2,681,047$ (369,944)$ 7/1/2014 0.0 119.45% 2,668,525$ (434,495)$

Refugio Co. Memorial Hosp. Dist. Retirement Plan Frozen 11/1/2015 0.0 102.18% 2,078,030$ (44,315)$ 11/1/2014 1.0 99.94% 2,093,537$ 1,334$

4 5,025,729,087$ 2,530,486,041$ 11 27,580,602,671$ 8,202,042,842$

16 5,929,832,157$ 2,471,047,384$ 15 6,148,749,690$ 2,208,216,190$

34 170,870,608,063$ 45,799,186,429$ 36 144,197,408,578$ 37,820,624,064$

23 34,045,554,374$ 7,116,298,844$ 16 30,053,668,611$ 5,802,571,295$

12 28,225,474,682$ 3,194,232,362$ 12 25,521,857,156$ 2,924,258,145$

Subtotal: Plans with amortization periods = 0 years 4 127,820,089$ (788,117)$ 2 167,483,752$ (7,435,862)$

Grand Totals: 93 79.99% 244,225,018,452$ 61,110,462,943$ 92 80.40% 233,669,770,458$ 56,950,276,674$

Notes:

(6) Amortization period is calculated using system wide aggregate UAAL and payroll amounts.

(1) Plan status indicates whether plan is active (admitting new hires), closed to new hires (but still accruing benefits), or frozen (not accruing benefits).

Subtotal: Plans with amortization periods > 40 years, but not infinite

Subtotal: Plans with amortization periods > 25 years < 40 years



Subtotal: Plans with infinite amortization periods

(5) JRS I is a pay-as-you go system with no assets devoted to the plan.

(8) Amortization period is an unweighted average amortization period of member employers.

(2) Amortization period calculated by the PRB in consultation with the plan actuary, reflecting a contribution rate increase of 0.65% effective January 1, 2015.

(3) Amortization period estimated by the PRB assuming the pension obligation bond is fully paid in 2035. The PRB actuary will revist this calculation in the near future.

(4) Amortization period as calculated by the system.The prior amortization period was calculated by the PRB in consultation with the system.

(7) Amortization period is calculated by the PRB. These systems use layered, closed amrotization and do not report a single aggregate period.


3


Actuarial Valuation Supplemental Report

August 4, 2016

Plan Name

Plan

Status

(1)

Current

Amort

period

Actuarial Value

of Assets

Market Value

of Assets

Actuarial Accrued

Liabilities

Unfunded Actuarial

Accrued Liability

(UAAL)

Covered

Payroll

UAAL as % of

Payroll

Active

members

(9)

UAAL Per

Active

Member (10)

Dallas Police and Fire Pension System-Combined Plan Active Infinite 3,695,273,876$ 3,079,394,897$ 5,792,216,025$ 2,096,942,149$ 383,006,330$ 547.50% 5,487 382,166$

Law Enforcement and Custodial Officer Sup. Ret. Fund Active Infinite 909,249,614$ 844,145,332$ 1,262,311,389$ 353,061,775$ 1,750,709,090$ 20.17% 38,526 9,164$

Judicial Retirement System of Texas Plan Two Active Infinite 372,615,005$ 364,510,248$ 404,010,572$ 31,395,567$ 80,352,000$ 39.07% 563 55,765$

Odessa Firemen's Relief & Retirement Fund Active Infinite 48,590,592$ 47,455,341$ 97,677,142$ 49,086,550$ 10,683,114$ 459.48% 163 301,144$

Wichita Falls Firemen's Relief and Retirement Fund Active 105.9 47,133,894$ 47,517,957$ 72,251,770$ 25,117,876$ 9,629,250$ 260.85% 156 161,012$

Fort Worth Employees Retirement Fund Active 72.5 2,154,874,311$ 2,019,197,584$ 3,553,200,981$ 1,398,326,670$ 404,303,585$ 345.86% 6,280 222,663$

Greenville Firemen's Relief and Retirement Fund Active 70.4 13,440,264$ 13,597,202$ 27,461,973$ 14,021,709$ 3,805,174$ 368.49% 60 233,695$

Harlingen Firemen's Relief and Retirement Fund Active 66.6 28,343,328$ 28,343,328$ 39,930,327$ 11,586,999$ 5,912,428$ 195.98% 108 107,287$

Irving Firemen's Relief and Retirement Fund (2) Active 63.4 156,223,428$ 171,294,299$ 213,725,584$ 57,502,156$ 25,482,413$ 225.65% 314 183,128$

Midland Firemen's Relief and Retirement Fund Active 59.1 78,481,491$ 80,950,814$ 117,444,545$ 38,963,054$ 14,597,213$ 266.92% 178 218,894$

Sweetwater Firemen's Relief and Retirement Fund Active 58.8 8,180,692$ 8,264,183$ 11,854,720$ 3,674,028$ 1,491,809$ 246.28% 25 146,961$

Orange Firemen's Relief and Retirement Fund Active 58.2 9,383,309$ 9,309,315$ 16,345,289$ 6,961,980$ 2,292,120$ 303.74% 37 188,162$

Galveston Employees Retirement Plan for Police Active 55.1 22,028,282$ 23,015,770$ 49,685,735$ 27,657,453$ 9,310,513$ 297.06% 141 196,152$

University Park Firemen's Relief and Retirement Fund Active 53.7 9,440,082$ 9,515,461$ 20,598,361$ 11,158,279$ 3,112,702$ 358.48% 35 318,808$

Galveston Firefighter's Relief & Retirement Fund Active 50.2 39,591,204$ 41,038,374$ 56,839,842$ 17,248,638$ 6,542,789$ 263.63% 106 162,723$

Dallas Employees' Retirement Fund (3) Active 50.0 3,241,053,000$ 3,390,579,000$ 4,004,055,000$ 763,002,000$ 363,109,000$ 210.13% 7,180 106,268$

Marshall Firemen's Relief and Retirement Fund Active 43.2 8,003,545$ 8,003,545$ 17,253,390$ 9,249,845$ 2,466,068$ 375.08% 47 196,805$

Longview Firemen's Relief and Retirement Fund Active 41.4 45,224,598$ 45,224,598$ 84,174,500$ 38,949,902$ 11,141,833$ 349.58% 175 222,571$

San Angelo Firemen's Relief and Retirement Fund Active 40.9 54,227,452$ 58,441,691$ 83,416,973$ 29,189,521$ 10,412,929$ 280.32% 177 164,913$

Lufkin Firemen's Relief and Retirement Fund Active 40.6 14,203,277$ 14,264,481$ 32,640,551$ 18,437,274$ 4,966,395$ 371.24% 79 233,383$

Beaumont Firemen's Relief and Retirement Fund Active 39.1 105,072,038$ 102,800,572$ 144,479,947$ 39,407,909$ 18,408,996$ 214.07% 231 170,597$

Conroe Fire Fighters' Retirement Fund Active 37.4 18,126,626$ 18,207,825$ 29,344,347$ 11,217,721$ 5,660,398$ 198.18% 81 138,490$

Brownwood Firemen's Relief and Retirement Fund Active 37.0 3,292,135$ 3,426,410$ 7,522,774$ 4,230,639$ 1,628,544$ 259.78% 32 132,207$

Atlanta Firemen's Relief and Retirement Fund Active 36.2 3,549,153$ 3,614,929$ 4,335,042$ 785,889$ 602,486$ 130.44% 25 31,436$

Teacher Retirement System of Texas Active 33.3 133,485,187,642$ 128,538,706,212$ 166,452,924,504$ 32,967,736,862$ 39,620,491,179$ 83.21% 828,945 39,771$

Employees Retirement System of Texas Active 33.0 25,850,542,024$ 23,998,481,161$ 33,868,359,950$ 8,017,817,926$ 6,659,646,892$ 120.39% 142,409 56,301$

Houston Municipal Employees Pension System (4) Active 32.0 2,582,510,000$ 2,456,544,000$ 4,765,719,000$ 2,183,209,000$ 584,025,000$ 373.82% 11,827 184,595$

El Paso Police Pension Fund Active 32.0 696,437,201$ 736,491,378$ 890,192,914$ 193,755,713$ 70,817,206$ 273.60% 1,052 184,178$

Texas City Firemen's Relief and Retirement Fund Active 31.6 16,274,374$ 15,837,081$ 29,920,425$ 13,646,051$ 4,716,136$ 289.35% 68 200,677$

Abilene Firemen's Relief and Retirement Fund Active 31.5 56,624,807$ 52,343,510$ 100,037,237$ 43,412,430$ 13,729,802$ 316.19% 178 243,890$

Plainview Firemen's Relief and Retirement Fund Active 31.4 5,262,382$ 5,469,458$ 13,493,203$ 8,230,821$ 1,781,664$ 461.97% 36 228,634$

Big Spring Firemen's Relief and Retirement Fund Active 30.8 9,889,540$ 9,991,843$ 17,433,912$ 7,544,372$ 3,173,050$ 237.76% 52 145,084$

Houston Firefighter's Relief and Retirement Fund Active 30.0 3,430,436,708$ 3,430,436,708$ 3,963,082,000$ 532,645,292$ 271,828,000$ 195.95% 3,745 142,228$

City Public Service of San Antonio Pension Plan Active 30.0 1,403,534,394$ 1,403,119,018$ 1,667,145,351$ 263,610,957$ 235,359,933$ 112.00% 2,830 93,149$

University Health System Pension Plan Active 30.0 205,905,204$ 190,905,204$ 281,433,759$ 75,528,555$ 239,317,254$ 31.56% 4,605 16,401$

Port of Houston Authority Retirement Plan Closed 30.0 166,856,925$ 166,856,925$ 171,223,667$ 4,366,742$ 30,412,207$ 14.36% 403 10,836$

DART Employees' Defined Benefit Retirement Plan Closed 30.0 150,995,597$ 156,829,423$ 203,311,783$ 52,316,186$ 19,129,074$ 273.49% 311 168,219$

Texas Emergency Services Retirement System Active 30.0 83,761,038$ 91,683,156$ 109,854,799$ 26,093,761$ N/A N/A 4,036 6,465$

Galveston Wharves Pension Plan Frozen 30.0 12,023,524$ 12,023,524$ 14,502,240$ 2,478,716$ 3,289,226$ 75.36% 59 42,012$

Judicial Retirement System of Texas Plan One (5) Closed 30.0 -$ -$ 223,170,656$ 223,170,656$ 1,470,000$ 15181.68% 10 22,317,066$

Laredo Firefighters Retirement System Active 29.8 116,056,855$ 118,339,638$ 194,345,799$ 78,288,944$ 31,185,860$ 251.04% 373 209,890$

Killeen Firemen's Relief and Retirement Fund Active 29.5 32,604,554$ 31,844,201$ 49,056,514$ 16,451,960$ 12,457,025$ 132.07% 202 81,445$

Denison Firemen's Relief and Retirement Fund Active 29.1 14,577,695$ 15,713,372$ 20,358,784$ 5,781,089$ 3,093,843$ 186.86% 57 101,423$

Dallas Co. Hospital Dist. Retirement Income Plan Active 29.0 749,980,945$ 766,804,138$ 982,273,448$ 232,292,503$ 554,120,446$ 41.92% 9,936 23,379$


1


August 4, 2016

Plan Name

Plan

Status

(1)

Current

Amort

period

Actuarial Value

of Assets

Market Value

of Assets

Actuarial Accrued

Liabilities

Unfunded Actuarial

Accrued Liability

(UAAL)

Covered

Payroll

UAAL as % of

Payroll

Active

members

(9)

UAAL Per

Active

Member (10)

McAllen Firemen's Relief and Retirement Fund Active 29.0 44,684,917$ 42,720,352$ 63,124,660$ 18,439,743$ 11,162,603$ 165.19% 162 113,826$

Amarillo Firemen's Relief and Retirement Fund Active 28.8 132,542,271$ 148,585,336$ 159,728,004$ 27,185,733$ 16,649,231$ 163.29% 242 112,338$

Austin Police Officers' Retirement Fund Active 28.6 653,192,335$ 638,019,067$ 968,340,394$ 315,148,059$ 150,574,998$ 209.30% 1,777 177,348$

Houston MTA Workers Union Pension Plan Closed 28.0 223,969,107$ 229,990,069$ 351,607,326$ 127,638,219$ 93,228,000$ 136.91% 2,108 60,549$

Houston MTA Non-Union Pension Plan Active 28.0 142,619,248$ 146,207,172$ 213,250,277$ 70,631,029$ 44,838,000$ 157.52% 620 113,921$

Lubbock Fire Pension Fund Active 27.6 186,077,176$ 185,255,012$ 246,362,848$ 60,285,672$ 28,340,148$ 212.72% 407 148,122$

Cleburne Firemen's Relief and Retirement Fund Active 27.3 20,349,833$ 20,983,672$ 31,165,605$ 10,815,772$ 4,017,037$ 269.25% 53 204,071$

San Antonio Metro. Transit Retirement Plan (VIA) Active 27.0 210,446,812$ 227,517,860$ 355,387,936$ 144,941,124$ 83,962,108$ 172.63% 1,353 107,126$

Paris Firefighters' Relief and Retirement Fund Active 26.1 5,980,762$ 5,461,733$ 13,991,898$ 8,011,136$ 2,575,856$ 311.01% 50 160,223$

Irving Supplemental Benefit Plan Active 25.0 51,244,241$ 50,860,876$ 63,313,489$ 12,069,248$ 93,918,844$ 12.85% 1,378 8,759$

Waxahachie Firemen's Relief and Retirement Fund Active 24.3 13,717,245$ 13,717,245$ 19,907,219$ 6,189,974$ 3,688,860$ 167.80% 54 114,629$

Corsicana Firemen's Relief and Retirement Fund Active 24.2 8,427,052$ 8,161,618$ 15,741,031$ 7,313,979$ 3,761,184$ 194.46% 60 121,900$

Austin Employees' Retirement Fund Active 24.0 2,193,881,221$ 2,209,799,679$ 3,094,055,712$ 900,174,491$ 539,158,693$ 166.96% 9,028 99,709$

Denton Firemen's Relief and Retirement Fund Active 24.0 62,089,743$ 66,412,172$ 80,490,694$ 18,400,951$ 13,790,301$ 133.43% 169 108,881$

Capital Metro Retirement Plan for Bargaining Units Frozen 24.0 27,913,393$ 29,608,577$ 59,874,604$ 31,961,211$ N/A N/A 274 116,647$

Corpus Christi Fire Fighters' Retirement System Active 23.1 126,273,629$ 130,814,419$ 205,789,604$ 79,515,975$ 29,484,531$ 269.69% 408 194,892$

Houston Police Officers Pension System Active 23.0 4,550,620,000$ 4,304,521,000$ 5,706,130,000$ 1,155,510,000$ 406,233,000$ 284.45% 5,261 219,637$

El Paso Firemen's Pension Fund Active 23.0 479,228,995$ 506,891,867$ 593,936,328$ 114,707,333$ 53,872,177$ 212.93% 871 131,696$

Temple Firemen's Relief and Retirement Fund Active 23.0 39,056,649$ 39,633,562$ 50,613,335$ 11,556,686$ 7,446,056$ 155.21% 119 97,115$

Tyler Firemen's Relief and Retirement Fund Active 22.9 56,547,675$ 61,495,625$ 76,823,319$ 20,275,644$ 10,937,907$ 185.37% 155 130,811$

Lower Colorado River Auth. Retirement Plan and Trust Closed 22.0 411,596,334$ 414,053,424$ 517,781,914$ 106,185,580$ 114,721,000$ 92.56% 1,413 75,149$

San Benito Firemen's Pension Fund Active 21.7 3,216,957$ 3,216,957$ 5,289,745$ 2,072,788$ 1,220,173$ 169.88% 25 82,912$

Texas Municipal Retirement System (6) Active 20.6 24,347,200,578$ 23,708,162,580$ 28,378,352,783$ 4,031,152,205$ 5,851,000,000$ 68.90% 106,894 37,712$

Nacogdoches County Hosp. District Retirement Plan Active 20.0 37,500,063$ 38,372,816$ 46,658,516$ 9,158,453$ 30,781,975$ 29.75% 625 14,654$

Capital Metro Retirement Plan for Admin Employees Active 20.0 19,247,210$ 20,069,580$ 23,831,541$ 4,584,331$ 16,958,402$ 27.03% 264 17,365$

Texarkana Firemen's Relief and Retirement Fund Active 19.6 30,058,082$ 32,142,725$ 35,519,165$ 5,461,083$ 4,019,902$ 135.85% 78 70,014$

Harris County Hospital District Pension Plan (7) Closed 19.1 579,800,249$ 565,273,878$ 825,466,159$ 245,665,910$ 194,918,223$ 126.04% 2,668 92,079$

Dallas/Ft. Worth Airport Board Retirement Plan Active 19.0 422,736,569$ 406,504,303$ 540,170,323$ 117,433,754$ 59,466,874$ 197.48% 866 135,605$

Dallas/Ft. Worth Airport Board DPS Retirement Plan Active 19.0 152,273,098$ 146,297,465$ 203,482,590$ 51,209,492$ 26,882,864$ 190.49% 348 147,154$

Port Arthur Firemen's Relief and Retirement Fund Active 17.0 40,754,274$ 42,934,035$ 52,655,260$ 11,900,986$ 7,423,270$ 160.32% 105 113,343$

Brazos River Authority Retirement Plan Frozen 17.0 21,358,481$ 21,895,301$ 29,976,521$ 8,618,040$ 9,941,752$ 86.69% 120 71,817$

Weslaco Firemen's Relief and Retirement Fund Active 15.9 8,355,918$ 8,510,261$ 12,070,005$ 3,714,087$ 3,043,816$ 122.02% 66 56,274$

Physicians Referral Service Retirement Benefit Plan Active 15.0 413,700,959$ 395,465,796$ 587,236,850$ 173,535,891$ 405,332,200$ 42.81% 1,435 120,931$

Galveston Employees' Retirement Fund Active 13.7 45,784,122$ 42,942,347$ 58,689,316$ 12,905,194$ 21,506,648$ 60.01% 459 28,116$

San Antonio Fire and Police Pension Fund Active 11.1 2,858,461,847$ 2,595,910,683$ 3,218,382,810$ 359,920,963$ 310,809,257$ 115.80% 3,815 94,344$

El Paso City Employees' Pension Fund Active 11.0 663,063,411$ 732,528,317$ 859,744,935$ 196,681,524$ 153,613,608$ 128.04% 4,149 47,405$

Corpus Christi Regional Transportation Authority Active 11.0 25,566,845$ 25,566,845$ 27,944,142$ 2,377,297$ 7,474,445$ 31.81% 205 11,597$

Austin Fire Fighters Relief and Retirement Fund Active 10.6 789,433,224$ 789,433,224$ 868,146,375$ 78,713,151$ 82,450,505$ 95.47% 1,025 76,793$

Dallas Police and Fire Pension System-Supp Active 10.0 21,438,870$ 21,438,870$ 41,910,358$ 20,471,488$ 556,725$ 3677.13% 39 524,910$

Northeast Medical Center Hospital Retirement Plan Frozen 10.0 9,853,521$ 9,853,521$ 11,709,335$ 1,855,814$ N/A N/A 0 -

Colorado River Municipal Water Dist. Pension Trust (7) Active 9.4 9,173,226$ 9,173,226$ 9,809,078$ 635,852$ 2,851,589$ 22.30% 55 11,561$

Texas County & District Retirement System (8) Active 9.2 23,751,821,185$ 24,715,158,467$ 26,252,851,945$ 2,501,030,760$ 5,779,000,000$ 43.28% 125,860 19,872$

Guadalupe-Blanco River Authority Closed 7.9 25,587,452$ 25,316,487$ 29,637,113$ 4,049,661$ 7,565,168$ 53.53% 111 36,483$

Northwest Texas Healthcare System Retirement Plan Frozen 7.4 17,736,458$ 18,439,946$ 28,885,608$ 11,149,150$ N/A N/A 169 65,971$


2


August 4, 2016

Plan Name

Plan

Status

(1)

Current

Amort

period

Actuarial Value

of Assets

Market Value

of Assets

Actuarial Accrued

Liabilities

Unfunded Actuarial

Accrued Liability

(UAAL)

Covered

Payroll

UAAL as % of

Payroll

Active

members

(9)

UAAL Per

Active

Member (10)

Travis Cty ESD #6 Firemen's Relief & Retirement Fund Active 7.3 7,554,521$ 8,007,889$ 11,996,029$ 4,441,508$ 4,278,012$ 103.82% 68 65,316$

Plano Retirement Security Plan Active 0.0 100,876,901$ 110,804,917$ 100,604,971$ (271,930)$ 117,023,684$ -0.23% 1,988 (137)$

The Woodlands Firefighters' Retirement System Active 0.0 22,184,111$ 22,184,111$ 22,082,183$ (101,928)$ 10,625,420$ -0.96% 136 (749)$

Arlington Employees Deferred Income Plan Active 0.0 2,681,047$ 2,681,047$ 2,311,103$ (369,944)$ 2,590,679$ -14.28% 666 (555)$

Refugio Co. Memorial Hosp. Dist. Retirement Plan Frozen 0.0 2,078,030$ 2,078,030$ 2,033,715$ (44,315)$ N/A N/A 66 (671)$

Counts:

Subtotal: Plans with infinite amortization periods 4

Subtotal: Plans with amortization periods > 40 years, but not infinite 16

Subtotal: Plans with amortization periods > 25 years < 40 years 34



Subtotal: Plans with amortization periods = 0 years 4

Grand Totals: 93 244,225,018,452$ 236,631,607,067$ 305,335,481,395$ 61,110,462,943$

Notes:

(4) Amortization period as calculated by the system.The prior amortization period was calculated by the PRB in consultation with the system.

(5) JRS I is a pay-as-you go system with no assets devoted to the plan.

(6) Amortization period is calculated using system wide aggregate UAAL and payroll amounts.

(7) Amortization period is calculated by the PRB. These systems use layered, closed amrotization and do not report a single aggregate period.

(9) Active member information taken from current actuarial valuation; may not represent most current membership report.

(10) UAAL can be amortized by either employer or employee contributions.

(8) Amortization period is an unweighted average amortization period of member employers.

(1) Plan status indicates whether plan is active (admitting new hires), closed to new hires (but still accruing benefits), or frozen (not accruing benefits).

(2) Amortization period calculated by the PRB in consultation with the plan actuary, reflecting a contribution rate increase of 0.65% effective January 1, 2015.

(3) Amortization period estimated by the PRB assuming the pension obligation bond is fully paid in 2035. The PRB actuary will revist this calculation in the near future.


3



[DATE]


Plan Name

Plan

Status1

Effective

Date

Discount

Rate

Current

Amort

Period

Funded

Ratio %

Market Value

of Assets

(MVA)

Actuarial Value

of Assets

(AVA)

Unfunded

Actuarial Accrued

Liability

(UAAL =

AAL - AVA)

UAAL

as % of

Payroll

Effective

Date

Prior

Amort

Period

Funded

Ratio %

Plan 1 Active 1/1/2015 7.50% Infinite 66.7 3,000,000,000$ 4,000,000,000$ 2,000,000,000$ 547.50% 1/1/2014 26.0 75.6

Plan 2 Active 8/31/2015 8.50% 105.9 69.2 800,000,000$ 900,000,000$ 400,000,000$ 20.17% 8/31/2014 Infinite 73.2

Plan 3 Active 8/31/2015 8.00% 45.0 93.0 400,000,000$ 400,000,000$ 30,000,000$ 39.07% 8/31/2014 24.0 90.2

Plan 4 Active 1/1/2015 8.25% 32.0 50.0 50,000,000$ 50,000,000$ 50,000,000$ 459.48% 1/1/2013 63.2 48.8

Plan 5 Active 1/1/2015 6.50% 25.0 62.5 50,000,000$ 50,000,000$ 30,000,000$ 260.85% 12/31/2012 0.0 63.0

Plan 6 Active 12/31/2014 5.00% 21.0 50.0 10,000,000$ 10,000,000$ 10,000,000$ 368.49% 12/31/2012 32.0 47.4

Plan 7 Active 12/31/2013 7.50% 15.0 75.0 30,000,000$ 30,000,000$ 10,000,000$ 195.98% 12/31/2011 0.0 65.1

Plan 8 Active 1/1/2014 7.50% 9.0 76.9 200,000,000$ 200,000,000$ 60,000,000$ 225.65% 1/1/2012 Infinite 67.4

Plan 9 Active 1/1/2014 7.50% 4.0 66.7 80,000,000$ 80,000,000$ 40,000,000$ 266.92% 1/1/2012 86.3 72.2

Plan 10 Active 12/31/2014 7.50% 0.0 66.7 8,000,000$ 8,000,000$ 4,000,000$ 246.28% 12/31/2012 12.0 69.5

1 2

Subtotal: Plans with amortization periods > 40 years, but not infinite 2 2

Subtotal: Plans with amortization periods > 25 years < 40 years 2 2



Subtotal: Plans with amortization periods = 0 years 1 2

Grand Totals: 10 68.5% $4,628,000,000 $5,728,000,000 $2,634,000,000 10 68.5%

Notes:1

Subtotal: Plans with infinite amortization periods

Plan status indicates whether plan is active (admitting new hires), closed to new hires (but still accruing benefits), or frozen (not accruing benefits).

This report is a compilation of pension data reported by retirement systems in their most recent Actuarial Valuations, sorted by amortization period.

1

DRAFT


Assumed Discount Rate/RoR Grouping

Version 1

Plan Name Effective Date Assumed RoR

Houston Firefighters' Relief & Retirement Fund 7/1/2013 8.50%

Greenville Firemen's Relief & Retirement Fund 12/31/2014 8.25%

Amarillo Firemen's Relief & Retirement Fund 1/1/2014 8.25%

Irving Firemen's Relief & Retirement Fund 1/1/2014 8.25%

Sweetwater Firemen's Relief & Retirement Fund 12/31/2014 8.00%

Paris Firefighters' Relief & Retirement Fund 12/31/2014 8.00%

Big Spring Firemen's Relief & Retirement Fund 1/1/2013 8.00%

University Park Firemen's Relief & Retirement Fund 1/1/2015 8.00%

Northwest Texas Healthcare System Retirement Plan 10/1/2013 8.00%

Harlingen Firemen's Relief & Retirement Fund 12/31/2013 8.00%

Temple Firemen's Relief & Retirement Fund 9/30/2014 8.00%

Port Arthur Firemen's Relief & Retirement Fund 1/1/2014 8.00%

Galveston Firefighter's Relief & Retirement Fund 1/1/2014 8.00%

Wichita Falls Firemen's Relief & Retirement Fund 1/1/2015 8.00%

Longview Firemen's Relief & Retirement Fund 12/31/2015 8.00%

Abilene Firemen's Relief & Retirement Fund 10/1/2015 8.00%

Midland Firemen's Relief & Retirement Fund 1/1/2014 8.00%

Beaumont Firemen's Relief & Retirement Fund 12/31/2014 8.00%

Laredo Firefighters Retirement System 9/30/2014 8.00%

Judicial Retirement System of Texas Plan One 8/31/2015 8.00%

Judicial Retirement System of Texas Plan Two 8/31/2015 8.00%

Law Enforcement & Custodial Officer Supplemental Retirement Fund 8/31/2015 8.00%

Dallas Employees' Retirement Fund 12/31/2015 8.00%

Houston Municipal Employees Pension System 7/1/2015 8.00%

Houston Police Officer's Pension System 7/1/2015 8.00%

Texas County & District Retirement System 12/31/2015 8.00%

Employees Retirement System of Texas 8/31/2015 8.00%

Teacher Retirement System of Texas 8/31/2015 8.00%

San Angelo Firemen's Relief & Retirement Fund 12/31/2013 7.90%

Corpus Christi Fire Fighters' Retirement System 12/31/2014 7.90%

Austin Police Retirement System 1/1/2016 7.80%

Plainview Firemen's Relief & Retirement Fund 12/31/2013 7.75%

Orange Firemen's Relief & Retirement Fund 1/1/2015 7.75%

Marshall Firemen's Relief & Retirement Fund 12/31/2014 7.75%

Denison Firemen's Relief & Retirement Fund 1/1/2014 7.75%

Texas City Firemen's Relief & Retirement Fund 12/31/2014 7.75%

Conroe Fire Fighters' Retirement Fund 12/31/2015 7.75%

Texarkana Firemen's Relief & Retirement Fund 12/31/2015 7.75%

Killeen Firemen's Relief & Retirement Fund 9/30/2014 7.75%

McAllen Firemen's Relief & Retirement Fund 10/1/2014 7.75%

Plano Retirement Security Plan 12/31/2013 7.75%

Texas Emergency Services Retirement System 8/31/2014 7.75%

Odessa Firemen's Relief & Retirement Fund 1/1/2016 7.75%

Lubbock Fire Pension Fund 1/1/2015 7.75%

El Paso Firemen's Pension Fund 1/1/2014 7.75%

El Paso Police Pension Fund 1/1/2014 7.75%

Dallas County Hospital District Retirement Income Plan 1/1/2016 7.75%

Fort Worth Employees' Retirement Fund 12/31/2015 7.75%

Austin Fire Fighters Relief & Retirement Fund 12/31/2015 7.70%

Tyler Fire Department Relief & Retirement Fund 12/31/2015 7.65%

Atlanta Firemen's Relief & Retirement Fund 12/31/2014 7.50%

Brownwood Firemen's Relief & Retirement Fund 12/31/2013 7.50%

Northeast Medical Center Hospital Retirement Plan 7/1/2015 7.50%

Galveston Wharves Pension Plan 1/1/2015 7.50%

Corsicana Firemen's Relief & Retirement Fund 12/31/2014 7.50%

Corpus Christi Regional Transportation Authority 1/1/2013 7.50%

Cleburne Firemen's Relief & Retirement Fund 12/31/2014 7.50%

Lufkin Firemen's Relief & Retirement Fund 12/31/2014 7.50%

Nacogdoches County Hospital District Retirement Plan 7/1/2013 7.50%

Galveston Employees' Retirement Plan for Police 1/1/2014 7.50%

Galveston Employees' Retirement Fund 12/31/2015 7.50%

Capital MTA Retirement Plan for Bargaining Unit Employees 1/1/2015 7.50%


Version 1

University Health System Pension Plan 1/1/2013 7.50%

San Antonio Metropolitan Transit Retirement Plan 10/1/2014 7.50%

Lower Colorado River Authority Retirement Plan 4/1/2015 7.50%

Physicians Referral Service Retirement Benefit Plan 9/1/2015 7.50%

Harris County Hospital District Pension Plan 1/1/2016 7.50%

El Paso City Employees' Pension Fund 9/1/2014 7.50%

City Public Service of San Antonio Pension Plan 1/1/2015 7.50%

Austin Employees' Retirement System 12/31/2015 7.50%

Weslaco Firemen's Relief & Retirement Fund 9/30/2014 7.25%

Guadalupe-Blanco River Authority 1/1/2015 7.25%

Dallas Police & Fire Pension System-Supplemental 1/1/2016 7.25%

Dallas/Fort Worth Airport Board DPS Retirement Plan 1/1/2016 7.25%

Dallas/Fort Worth Airport Board Retirement Plan 1/1/2016 7.25%

San Antonio Fire & Police Pension Fund 10/1/2015 7.25%

Dallas Police & Fire Pension System-Combined Plan 1/1/2016 7.25%

Refugio County Memorial Hospital District Retirement Plan 11/1/2015 7.00%

San Benito Firemen's Pension Fund 12/31/2013 7.00%

Travis County ESD # 6 Firefighter's Relief & Retirement Fund 1/1/2014 7.00%

Waxahachie Firemen's Relief & Retirement Fund 10/1/2014 7.00%

The Woodlands Firefighters' Retirement System 1/1/2016 7.00%

Capital MTA Retirement Plan for Administrative Employees 1/1/2015 7.00%

Irving Supplemental Benefit Plan 1/1/2015 7.00%

Denton Firemen's Relief & Retirement Fund 12/31/2013 7.00%

Port of Houston Authority Retirement Plan 8/1/2015 7.00%

DART Employees' Defined Benefit Retirement Plan & Trust 10/1/2014 7.00%

Colorado River Municipal Water District Defined Benefit Retirement Plan & Trust 1/1/2016 6.75%

Houston MTA Non-Union Pension Plan 1/1/2016 6.75%

Houston MTA Workers Union Pension Plan 1/1/2016 6.75%

Texas Municipal Retirement System 12/31/2015 6.75%

Brazos River Authority Retirement Plan 3/1/2016 6.50%

Arlington Employees Deferred Income Plan 7/1/2015 5.50%

Greater than 8.00% 4 8%

8.00% 24 8%

7.51% to 7.99% 22 7.50%

7.01% - 7.50% 27 7%

7.00% or less 16 7%

Mean 7.59%

Standard Deviation 0.46%

Median 7.75%

Liability Weighted Median 8.00%

Liabliity Weighted Mean 7.84%



Version 2Plan Name Effective Date Assumed RoR

Houston Firefighters' Relief & Retirement Fund 7/1/2013 8.50%

Irving Firemen's Relief & Retirement Fund 1/1/2014 8.25%

Amarillo Firemen's Relief & Retirement Fund 1/1/2014 8.25%

Greenville Firemen's Relief & Retirement Fund 12/31/2014 8.25%

Midland Firemen's Relief & Retirement Fund 1/1/2014 8.00%

Big Spring Firemen's Relief & Retirement Fund 1/1/2013 8.00%

Teacher Retirement System of Texas 8/31/2015 8.00%

Judicial Retirement System of Texas Plan Two 8/31/2015 8.00%

Houston Police Officer's Pension System 7/1/2015 8.00%

Law Enforcement & Custodial Officer Supplemental Retirement Fund 8/31/2015 8.00%

Northwest Texas Healthcare System Retirement Plan 10/1/2013 8.00%

Galveston Firefighter's Relief & Retirement Fund 1/1/2014 8.00%

Harlingen Firemen's Relief & Retirement Fund 12/31/2013 8.00%

Judicial Retirement System of Texas Plan One 8/31/2015 8.00%

Port Arthur Firemen's Relief & Retirement Fund 1/1/2014 8.00%

Laredo Firefighters Retirement System 9/30/2014 8.00%

Temple Firemen's Relief & Retirement Fund 9/30/2014 8.00%

University Park Firemen's Relief & Retirement Fund 1/1/2015 8.00%

Beaumont Firemen's Relief & Retirement Fund 12/31/2014 8.00%

Sweetwater Firemen's Relief & Retirement Fund 12/31/2014 8.00%

Houston Municipal Employees Pension System 7/1/2015 8.00%

Wichita Falls Firemen's Relief & Retirement Fund 1/1/2015 8.00%

Employees Retirement System of Texas 8/31/2015 8.00%

Paris Firefighters' Relief & Retirement Fund 12/31/2014 8.00%

Longview Firemen's Relief & Retirement Fund 12/31/2015 8.00%

Abilene Firemen's Relief & Retirement Fund 10/1/2015 8.00%

Dallas Employees' Retirement Fund 12/31/2015 8.00%

Texas County & District Retirement System 12/31/2015 8.00%

San Angelo Firemen's Relief & Retirement Fund 12/31/2013 7.90%

Corpus Christi Fire Fighters' Retirement System 12/31/2014 7.90%

Austin Police Retirement System 1/1/2016 7.80%Killeen Firemen's Relief & Retirement Fund 9/30/2014 7.75%

Fort Worth Employees' Retirement Fund 12/31/2015 7.75%

Conroe Fire Fighters' Retirement Fund 12/31/2015 7.75%

El Paso Police Pension Fund 1/1/2014 7.75%

El Paso Firemen's Pension Fund 1/1/2014 7.75%

Denison Firemen's Relief & Retirement Fund 1/1/2014 7.75%

Marshall Firemen's Relief & Retirement Fund 12/31/2014 7.75%

Odessa Firemen's Relief & Retirement Fund 1/1/2016 7.75%

Orange Firemen's Relief & Retirement Fund 1/1/2015 7.75%

Texas Emergency Services Retirement System 8/31/2014 7.75%

Plainview Firemen's Relief & Retirement Fund 12/31/2013 7.75%

Texas City Firemen's Relief & Retirement Fund 12/31/2014 7.75%

Lubbock Fire Pension Fund 1/1/2015 7.75%

McAllen Firemen's Relief & Retirement Fund 10/1/2014 7.75%

Plano Retirement Security Plan 12/31/2013 7.75%

Texarkana Firemen's Relief & Retirement Fund 12/31/2015 7.75%

Tyler Fire Department Relief & Retirement Fund 12/31/2015 7.75%

Dallas County Hospital District Retirement Income Plan 1/1/2016 7.75%

Austin Fire Fighters Relief & Retirement Fund 12/31/2015 7.70%

Corsicana Firemen's Relief & Retirement Fund 12/31/2014 7.50%


Version 2Corpus Christi Regional Transportation Authority 1/1/2013 7.50%

City Public Service of San Antonio Pension Plan 1/1/2015 7.50%

Cleburne Firemen's Relief & Retirement Fund 12/31/2014 7.50%

Nacogdoches County Hospital District Retirement Plan 7/1/2013 7.50%

Galveston Employees' Retirement Plan for Police 1/1/2014 7.50%

San Antonio Metropolitan Transit Retirement Plan 10/1/2014 7.50%

Lower Colorado River Authority Retirement Plan 4/1/2015 7.50%

Lufkin Firemen's Relief & Retirement Fund 12/31/2014 7.50%

University Health System Pension Plan 1/1/2013 7.50%

Galveston Wharves Pension Plan 1/1/2015 7.50%

El Paso City Employees' Pension Fund 9/1/2014 7.50%

Capital MTA Retirement Plan for Bargaining Unit Employees 1/1/2015 7.50%

Atlanta Firemen's Relief & Retirement Fund 12/31/2014 7.50%

Physicians Referral Service Retirement Benefit Plan 9/1/2015 7.50%

Galveston Employees' Retirement Fund 12/31/2015 7.50%

Harris County Hospital District Pension Plan 1/1/2016 7.50%

Brownwood Firemen's Relief & Retirement Fund 12/31/2013 7.50%

Northeast Medical Center Hospital Retirement Plan 7/1/2015 7.50%

Austin Employees' Retirement System 12/31/2015 7.50%

Weslaco Firemen's Relief & Retirement Fund 9/30/2014 7.25%

Guadalupe-Blanco River Authority 1/1/2015 7.25%

San Antonio Fire & Police Pension Fund 10/1/2015 7.25%

Dallas Police & Fire Pension System-Combined Plan 1/1/2016 7.25%

Dallas Police & Fire Pension System-Supplemental 1/1/2016 7.25%

Dallas/Fort Worth Airport Board Retirement Plan 1/1/2016 7.25%

Dallas/Fort Worth Airport Board DPS Retirement Plan 1/1/2016 7.25%

Waxahachie Firemen's Relief & Retirement Fund 10/1/2014 7.00%

Travis County ESD # 6 Firefighter's Relief & Retirement Fund 1/1/2014 7.00%

Denton Firemen's Relief & Retirement Fund 12/31/2013 7.00%

Port of Houston Authority Retirement Plan 8/1/2015 7.00%

Irving Supplemental Benefit Plan 1/1/2015 7.00%

San Benito Firemen's Pension Fund 12/31/2013 7.00%

Capital MTA Retirement Plan for Administrative Employees 1/1/2015 7.00%

DART Employees' Defined Benefit Retirement Plan & Trust 10/1/2014 7.00%

The Woodlands Firefighters' Retirement System 1/1/2016 7.00%

Refugio County Memorial Hospital District Retirement Plan 11/1/2015 7.00%

Texas Municipal Retirement System 12/31/2015 6.75%

Houston MTA Workers Union Pension Plan 1/1/2016 6.75%

Colorado River Municipal Water District Defined Benefit Retirement Plan & Trust 1/1/2016 6.75%

Houston MTA Non-Union Pension Plan 1/1/2016 6.75%

Brazos River Authority Retirement Plan 3/1/2016 6.50%

Arlington Employees Deferred Income Plan 7/1/2015 5.50%

Maximum x > 8.00% 4

3rd Quartile 7.75% < x <= 8.00% 27

Median 7.75% 18

1st Quartile 7.50% <= x < 7.75% 21

Minimum x < 7.50% 23


Supplemental Report[DATE]

(a) (b) (a) - (b)

Plan NameFiscal Year

EndDiscount

RateTotal Pension Liability (TPL)1

Fiduciary Net Position2

Net Pension Liability (NPL)3

Funded Ratio %

NPL at Discount Rate -1%4

Funded Ratio %

10 Year Net Return5

Plan 1 12/31/2014 8.00% 100,000,000$ 50,000,000$ 50,000,000$ 50.0 60,000,000$ 45.5 2.67%

Plan 2 8/31/2015 8.25% 200,000,000$ 180,000,000$ 20,000,000$ 90.4 30,000,000$ 85.7 5.45%

Plan 3 8/31/2015 5.50% 2,000,000$ 1,500,000$ 500,000$ 75.0 550,000$ 73.2 4.21%

Plan 4 12/31/2015 7.50% 4,000,000$ 3,500,000$ 500,000$ 87.5 1,000,000$ 77.8 N/A

Plan 5 12/31/2014 7.75% 3,000,000,000$ 2,000,000,000$ 1,000,000,000$ 71.4 1,000,000,000$ 66.7 5.19%

Plan 6 12/31/2014 7.70% 900,000,000$ 800,000,000$ 100,000,000$ 91.6 200,000,000$ 80.0 6.60%

Plan 7 9/30/2014 7.90% 1,000,000,000$ 600,000,000$ 400,000,000$ 65.7 400,000,000$ 60.0 6.71%

Plan 8 12/31/2014 8.00% 100,000,000$ 90,000,000$ 10,000,000$ 68.8 60,000,000$ 60.0 6.85%

Plan 9 12/31/2014 8.00% 20,000,000$ 10,000,000$ 10,000,000$ 50.0 10,000,000$ 50.0 4.54%

Plan 10 12/31/2014 6.50% 30,000,000$ 20,000,000$ 10,000,000$ 66.7 10,000,000$ 66.7 5.80%

Grand Totals: 5,356,000,000$ 3,755,000,000$ 1,601,000,000$ 70.1% 1,771,550,000$ 67.9%

Notes:1 Total Pension Liability is the actuarial accrued liability calculated in accordance with GASB 67, as reported in the system's Annual Financial Report.

2 Fiduciary Net Position is the market value of assets as of the Fiscal Year End, as reported in the system's Annual Finaicial Report.

3 Net Pension Liability is measured as the Total Pension Liability less the amount of the pension plan’s Fiduciary Net Position

4 Net Pension Liability measured using a discount rate 1% lower than the stated discount rate.

5 10 Year Net Return data from the corresponding PRB-1000 Investment Returns and Assumptions Report

This report is a compilation of pension data reported by retirement systems to the PRB in their most recently published Annual Financial Report and PRB-1000.

1

DRAFT


Contribution Report[DATE]

(a) (b) (c) = (a) - (b) (d) (e) = (c) + (d) (f) (f) / (e)

Plan NamePlan

Status1Fiscal Year

EndCoveredPayroll

Total NC(% of Pay)

EE Cont(% of Pay)

ER Normal Cost

(% of Pay)Amort Pmt(% of Pay)

ER Rec Cont(% of Pay)2

ActualER Cont

(% of Pay)Actual ER Cont Type

Percent of Rec Cont

PaidPlan 1 Active 12/31/2014 400,000,000$ 25.61% 8.50% 17.11% 16.40% 42.01% 27.50% Actuarial 65%

Plan 2 Active 8/31/2015 2,000,000,000$ 1.77% 0.50% 1.27% 0.74% 2.51% 1.70% Fixed 68%

Plan 3 Active 8/31/2015 80,000,000$ 21.40% 7.16% 14.24% 1.42% 22.82% 15.66% Actuarial 69%

Plan 4 Active 12/31/2015 10,000,000$ 18.73% 15.00% 3.73% 10.37% 29.10% 16.00% Fixed 55%



Plan 7 Active 9/30/2014 6,000,000$ 18.06% 13.00% 5.06% 0.94% 19.00% 13.00% Other 68%

Plan 8 Active 12/31/2014 30,000,000$ 18.44% 12.00% 6.44% 1.44% 19.88% 15.65% Actuarial 79%



Notes:1 Plan status indicates whether plan is active (admitting new hires), closed to new hires (but still accruing benefits), or frozen (not accruing benefits).

2 Recommended Contribution needed for the system to achieve and maintain an amoritization period that does not exceed 30 years, in accordance with Texas Code §802.101(a)

This report is a compilation of pension data reported by retirement systems to the PRB in their most recently published Annual Financial Report and Actuarial Valuations.

1

DRAFT

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STATE PENSION REVIEW BOARD OF TEXAS ACTUARIAL … · 2016. 9. 9. · Thursday, September 15, 2016...

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