arizona state retirement system presentation to the government finance officers association of...

Arizona State Retirement System

Presentation to the Government Finance Officers

Association of Arizona

January 7, 2011


• State of the ASRS Fund

• Current Legislative Action

• ASRS Cost Savings Initiatives

• Termination Incentive Programs


State of the Retirement Fund

Statistics(June 30, 2010)

• Approximate Plan Membership:– Active 220,000

– Inactive 210,000

– Retired & Survivors 101,000

– System 1,640

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Fiscal Year 2011-12 Contribution Rate

9.87% Pension

0.63% Health Insurance

0.25% Long Term Disability

10.75% Total effective 07/01/2011


• $26.6 billion fund balance as of 01/03/2011

• Combined total net assets held in trust for pension benefits was $23.4 billion at 06/30/10– 11.4% increase from $21.0 billion at 06/30/2009

• Rate of return on investments for FY 2010 was 14.9%– (18.1)% for FY 2009


• ASRS paid $2.21 billion in pension, disability, health insurance and survivor benefits during fiscal year 2010. – $2.07 billion during fiscal year 2009

• 06/30/10 Funded Status 76.7%– 06/30/09 funded status 79.3%


Legislative Update


• Alternate contribution rate for return to work retirees

• Administrative initiatives


Cost Savings Initiatives

Issues Past & Present

• Contribution Rates increasing

– Membership Decreases– Return to Work Contributions

– Service Purchase Inequities: Remedies 2004– Refund Accruals: Remedies 2004– Early Retirement Incentives: Remedies 2004– Miscellaneous: Remedies 2004+– Modified Deferred Retirement Option:Remedies 2006– Increasing Longevity: Remedies 2006, 2010– Salary Spiking: Remedies 2009, 2010– Refund Amounts: Remedies 2010

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Termination Incentive Plans


• A.R.S. § 38-749 “If a termination incentive program that is offered by an employer results in an actuarial unfunded liability to ASRS, the employer shall pay to ASRS the amount of the unfunded liability.”

Termination/Retirement Incentives

• Unfunded liability is still created if incentive does not include ASRS compensation

• Unfunded liability is still created if all participants are at normal retirement age

• Unfunded liability cannot be calculated until all participants retire


• Retirement unfunded liability is calculated as the difference between:– Present value of all future retirement benefits for active member with

age, service and annual compensation equal to actual data at retirement

– Present value of retirement benefit for retired member recognizing final benefit calculation and optional form election

• Health supplement unfunded liability is calculated as the difference between:– Present value of future health supplements for active member with

age, service and annual compensation equal to actual data at retirement

– The sum of:• Present value of actual health supplement payable for two years• Present value of assumed health supplements after two years


Example• Female • Age 64 • 34.84 years of credited service• Pre-1984 membership date• Annual salary $72,791• Incentive $25,818• Elected life annuity monthly benefit = $4,745.22

(ignoring partial lump sum)• Elected single health supplement of $150 per

month


Example Continued• Pension Cost

– Retirement present value as active = $531,274 – Present value as retired member with elected benefit = $575,879– Pension cost = $44,605

• Health Supplement Cost– Health supplement present value as active member = $8,352– Health supplement present value as retired member:

• Health supplement present value as retired member with election for two years = $2,786

• Health supplement present value as retired member with assumed supplements after two years = $8,607

– Retired member total = $11,393– Health supplement cost = $3,041

• Total Cost = $47,646


Questions?

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