4 6pres vrs
DESCRIPTION
Presentation I developed for the Director of Finance to present to the Board of County Supervisors regarding the sudden increase in local government contributions to employees retirement plans.TRANSCRIPT
Prince William County GovernmentPrince William County Government
Virginia Retirement System Contributions
Christopher E. Martino, Finance Director
Mr. Bryan Avant, ASA, EA
Bolton Partners, Inc.
2Date: 04/09/23
Agenda for 4/6/04
Brief Background Information on VRS and PWC participation
Employer Contribution Rate Prior Contribution Rates Pension Plan Terminology Current Contribution Rate Future Contribution Rates
Summary of Meeting with VRS on 3/26/04
Recommendations
3Date: 04/09/23
PWC has participated in VRS since 1962
A Board of Trustees oversees VRS Fiduciary responsibility Not elected officials
Employer participation is irrevocable (sec. 51.1-139) There are 405 participating political subdivisions
4Date: 04/09/23
PWC has participated in VRS since 1962
PWC has 4,894 participants as of 6/30/03 consisting of employees with PWC former employees separated from PWC that are still earning benefits in
VRS Former employees that are not earning benefits in VRS and are vested,
and those that are not Retirees from PWC receiving benefits Retirees from other employers that were with PWC at one time, now
receiving benefits
5Date: 04/09/23
PWC contributions consists of:
Employer’s Contribution Rate this is a percent determined at least every 2 years by VRS based on
actuarial information for PWC
Employee’s Share of 5% of salary, that PWC as an employer pays for its employees
Health Insurance Credit of 0.12%, and changes insignificantly
6Date: 04/09/23
PWC Contribution Rate History
PWC Employer Contribution %
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Jul-1994
Jul-1995
Jul-1996
Jul-1997
Jul-1998
Jul-1999
Jul-2000
Jul-2001
Jul-2002
Jul-2003
Jul-2004
Jul-2005
Employee 5%Share+EmployerContribution
7Date: 04/09/23
Terms
ACTUARIAL PRESENT VALUE is the amount that would have to be invested so that the invested amount + investment earnings would provide funding for Total Projected Benefits or benefits based on current service. PWC’s normal cost is currently approximately 12% of “covered” payroll,
which covers benefits based on current service.
8Date: 04/09/23
Actuarial Assumptions
Assumptions are used to value Actuarial Present Value and the liabilities of the plan
The assumptions used by VRS for PWC: 3% cost-of-living adjustments for retirees Pay raises from 4% to 6.1% (COLA+Merit) 8% market rate of return
9Date: 04/09/23
Terms
Actuarial Value of Assets vs. Market Value of Assets
PWC As of June 30, 2000 Valuation:
Market Value 393,409,421$ Actuarial Value 350,252,408 Deferred Gains 43,157,013$
10Date: 04/09/23
Terms
The sum of all costs based on service prior to the current year, or valuation date + any interest accrued on those costs =
ACTUARIAL ACCRUED LIABILITY
− Actuarial Value of Assets
= UNFUNDED ACTUARIAL ACCRUED LIABILITY or UAAL
11Date: 04/09/23
Plan Value on June 30, 2000
Actuarial Accrued Liability 297,709,457$ Actuarial Value of Assets 350,252,408 Unfunded AAL (52,542,951)$
12Date: 04/09/23
PWC Contribution Rate History
PWC Employer Contribution %
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Jul-1994
Jul-1995
Jul-1996
Jul-1997
Jul-1998
Jul-1999
Jul-2000
Jul-2001
Jul-2002
Jul-2003
Jul-2004
Jul-2005
Employee 5%Share+EmployerContribution
13Date: 04/09/23
If Market Performance was amortized over a longer term
PWC Employer Contribution %
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Jul-1994
Jul-1995
Jul-1996
Jul-1997
Jul-1998
Jul-1999
Jul-2000
Jul-2001
Jul-2002
Jul-2003
Jul-2004
Jul-2005
if 30yr amortizationwas used
Employee 5%Share+EmployerContribution
14Date: 04/09/23
Asset Value on June 30, 2003
PWC’s Unfunded Accrued Actuarial Liability is currently $9,967,281 requiring funding during amortization period through Contributions Market outperforming assumptions
Market Value 350,968,375$ Actuarial Value 418,599,981 Deferred Losses (67,631,606)$
15Date: 04/09/23
PWC contribution rate today
PWC Employer Contribution %
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Jul-1994
Jul-1995
Jul-1996
Jul-1997
Jul-1998
Jul-1999
Jul-2000
Jul-2001
Jul-2002
Jul-2003
Jul-2004
Jul-2005
if 30yr amortizationwas used
Employee 5%Share+EmployerContribution
16Date: 04/09/23
PWC contribution rate in the future
PWC Employer Contribution %
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Jul-1994
Jul-1995
Jul-1996
Jul-1997
Jul-1998
Jul-1999
Jul-2000
Jul-2001
Jul-2002
Jul-2003
Jul-2004
Jul-2005
Jul-2006
Jul-2007
if 30yr amortizationwas used
Employee 5%Share+EmployerContribution
17Date: 04/09/23
PWC contribution rate in the future
PWC Employer Contribution %
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Jul-1994
Jul-1995
Jul-1996
Jul-1997
Jul-1998
Jul-1999
Jul-2000
Jul-2001
Jul-2002
Jul-2003
Jul-2004
Jul-2005
Jul-2006
Jul-2007
if 30yr amortizationwas used
Employee 5%Share+EmployerContribution
Prince William County GovernmentPrince William County Government
PWC Staff Met with VRS
On 3/26/04
19Date: 04/09/23
VRS Actuarial Methods
The same VRS actuarial methods are used for every participating political subdivision and the Commonwealth
Participants’ contribution rates are not set based on Commonwealth budgets but rather they are based on the actuarial assumptions and the employer-specific asset and liability data
20Date: 04/09/23
Employer Contributions
Localities participating in VRS must pay the contribution determined as a result of actuarial studies
There are statutory penalties for failure to make the required contributions
Participation is irrevocable and the employers’ share for the employee is irrevocable
21Date: 04/09/23
Employer Contributions
The Commonwealth has not contributed the employer’s share
22Date: 04/09/23
VRS Actuarial Methods
Banding was implemented prior to significant market swings up and down as a way to limit fluctuation in employer contribution rates
That is not the result given the subsequent market performance Market performance was not forecasted by VRS or its actuary
23Date: 04/09/23
Recommendations: More Meaningful Summaries and Projections from VRS
VRS Actuary interpret and explain key issues as they arise
VRS Actuary explain the impact on the future of this current valuation in budgeting terms
Actuary to provide a 5-year forecast for PWC utilizing assumptions and estimates
24Date: 04/09/23
Recommendations for Staff
Contract with an actuary to review actuarial reports from VRS and use actuarial methods to provide 5-year projections
Staff to recommend funding strategies within the County’s 5-year budget plan to stabilize the County’s contribution rate Smooth out fluctuations in the rate and the impacts on the 5-year plan Make prepayments to VRS to cushion our contribution rate
Incorporate in Principles of Sound Financial Management policies regarding funding of VRS