MCCBOA Spring WorkshopMarch 2, 2012

Steve Crippen and John Donovan

Office of Retirement Services

Office of Retirement Services

Agenda

Introductions FY2013 & FY2014 Contribution rates

Investment returns History of membership, especially regarding

Community Colleges Healthcare Cost Containment

Reform Q&A

Office of Retirement Services

Contribution Rates

 

Fiscal Year 2012-13 Fiscal Year 2013-14First Work

BeforeJuly 1, 2010

First Work On or After July 1, 2010

First Work Before

July 1, 2010

First Work On or After July 1, 2010

Pension Normal Cost (Prefunded) 3.47% 2.24% 3.56% 2.29%Pension Unfunded Accrued Liability 12.49% 12.49% 16.24% 16.24%Early Retirement Incentive Program 2.66% 2.66% 2.66% 2.66%Pension Total Rate 18.62% 17.39% 22.46% 21.19%         Retiree Health (Cash Basis) 5.75% 5.75% 5.75% 5.75%Surcharge due to Injunction 3.00% 3.00% 3.00% 3.00%Health Total Rate 8.75% 8.75% 8.75% 8.75%         Grand Total 27.37% 26.14% 31.21% 29.94%

Office of Retirement Services

What Is Driving The Rates?

Recognition of investment losses over 5 years: FY2014 still has FY2008 and FY2009 losses. FY2015 will have FY2008 and FY2009 losses FY2016 will have just FY2009 losses

Retirement Incentive of 2.66%: affects years FY2013 through FY2017

Office of Retirement Services

Loss of membership: MPSERS 2003 peak of 327,000 members 2011 membership is 236,000

Community Colleges membership 2005: 21,599 2010: 22,556

Healthcare has been managed very well

What Is Driving The Rates?

Office of Retirement Services

Declined from 327,000 in 2003 to 236,600 in 2010 (27.6% decline in 8 years).

As membership declines, the contribution rate automatically increases.

If the 2011 population had remained at 2003 levels, the larger membership pool would have resulted in an FY 2011/2012 employer pension contribution rate at least 5 percent lower than it otherwise will be.

Health Care would be at least 2% lower

Membership

Office of Retirement Services

Year Health Expenditure per

Retiree°

National Per Capita

Average

2005 $6,794 $6,827

2006 $5,974 $7,198

2007 $5,460 $7,561

2008 $5,992 $7,845

2009 $6,333 $8,086

2010 $5,380 $8,401°

Cost Containment

Office of Retirement Services

Cost Containment

Office of Retirement Services

Reform

No Legislation Introduced Yet SERS reform

Refund 3% HCC Member contributions for future service Option to elect to Defined Contribution Option to continue graded health premium or convert

to “personal healthcare fund” SERS new hires are in the personal healthcare fund

Office of Retirement Services

Working After Retirement

Core Services

1/3 Earnings Limit

Bona-fide Termination

Compensation/Earnings

Office of Retirement Services

Core Services

Employee Class Codes and Definitions

Impact To Pension and Health Subsidy

Third Party Retiree Rehire Certification

http://www.state.mi.us/dmb/ors/emp/psru/docs/R0851C-Retiree-Rehire-Certification.pdf

Reporting Instruction Manual Appendix B

Office of Retirement Services

Retiree Earnings Limit

Pre 7/1/2010 Earnings Limit

Post 6/30/2010 Earnings Limit

Earnings Versus Compensation

Annual Limit – No Proration

Office of Retirement Services

Bona-fide Termination

401a IRS - Tax Qualified Status

Pre-promise Of Re-employment

30 Day Separation

Office of Retirement Services

Member Resources

For General Retirement Questions Information and Overview

http://www.michigan.gov/orsschools Member Account

www.michigan.gov/orsmiaccount Or Call: (800) 381-5111

Pension Plus Go To: http://www.mipensionplus.org

Office of Retirement Services

Employer Resources

For General Reporting Questions Go To: http://www.michigan.gov/psru Call: (517) 636-0166 Email: ORS_Web_Reporting@michigan.gov

Pension Plus Go To: http://www.mipensionplus.org

Office of Retirement Services

Questions?

Office of Retirement Services

Thanks For Inviting Us