presentation team 6 - university of california, los angelesactuary/casecompetition/case... · 2018....

AOFF ConsultingAustin Hunt / Natalie Joseph / Jianzhen Wang / Jiahui Zhou

Introduction

Actuarial Funding Valuation

Recommendation forActive Retirement Rates

Age Current New55 5% 5%56 5% 5%57 5% 5%58 5% 5%59 5% 10%60 10% 20%61 10% 25%62 20% 30%63 30% 30%

Age Current New64 40% 30%65 100% 30%66 100% 30%67 100% 30%68 100% 30%69 100% 30%70 100% 65%71 100% 100%

Assumptions Review

Active Retirement RatesAge Rates55 5%56 5%57 5%58 5%59 5%60 10%61 10%62 20%63 30%64 40%65 100%

Active Retirement RatesMr. Switch, born in 2000

Age 60 in 2060

Retire in 2060 – 2061: 10%

Age Rates55 5%… …60 10%… …

Active Retirement Rates

RATE =DECREMENTS

EXPOSURE

# (Retire at Age 60)# (Age 60)

YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016

DECREMENTS 12 14 6 7 8EXPOSURE 51 72 54 46 44

← EVENTS← TRIALS

Active Retirement Rates

RATE =DECREMENTS

EXPOSURE

# (Retire at Age 60)# (Age 60)

YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016

DECREMENTS 12 14 6 7 8EXPOSURE 51 72 54 46 44

47267 # = 17.60%

← EVENTS← TRIALS

Active Retirement Rates Based on 2012-17 Valuation Data

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72

Activ

e Re

tirem

ent R

ates

Age Actual Rates Based on Valuation Data

17.60%

Active Retirement RatesSample

Proportion ESTIMATE PopulationProportion

0% 3% 5% 8% 10% 13% 15% 18% 20% 23% 25%

95%CONFIDENCE INTERVAL

N = 267P = 10%

Age Rates60 10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72

Activ

e Re

tirem

ent R

ates

Age Current Assumption Confidence Interval

Active Retirement Rates with 95% Confidence Interval Around Current Assumption

10%

Age 60 CI

Active Retirement Rates with 95% Confidence Interval Around Current Assumption

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72

Activ

e Re

tirem

ent R

ates

Age Actual out of CIActual in CI Current Assumption

New Assumptions

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72

Activ

e Re

tirem

ent R

ates

Age Actual

Active Retirement Rates

New Assumption Current Assumption

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72

Activ

e Re

tirem

ent R

ates

Age Actual

Active Retirement Rates

New Assumption Current Assumption

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77

Term

inat

edVe

sted

Retir

emen

t Rat

es

Age Actual Current AssumptionNew Assumption

Terminated Vested Retirement Rates

0%

5%

10%

15%

20%

25%

30%

35%

40%

24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Activ

e Te

rmin

atio

nRa

tes

Age Actual Current AssumptionNew Assumption

Active Termination Rates

0%

5%

10%

15%

20%

25%

30%

35%

40%

24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Activ

e Te

rmin

atio

nRa

tes

Age Actual Current AssumptionNew Assumption

Active Termination Rates

0%

5%

10%

15%

20%

25%

30%

35%

40%

24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Activ

e Te

rmin

atio

nRa

tes

Age Actual Current AssumptionNew Assumption

Active Termination Rates

Liability

RETIRED• Commenced

Benefit

ACTIVE• Increase future

liability

TERMINATED• Vested• Not vested

Types of Participants

Active Retire

Terminated

ACTIVE RETIREMENT RATES

ACTIVE TERMINATIONRATES

TERMINATION VESTEDRETIREMENT RATES

Application of Rates

RetirementBenefit

Mortality

Discounting

Liability

RetirementDate

Methodology

$125 M

$132 M

$100

$105

$110

$115

$120

$125

$130

$135

Current New

Liab

ility

of A

ffect

ed G

roup

s(in

mill

ions

)$7M

Change in Liability

Conclusion

Thank You

Appendix I

CONFIDENCE INTERVAL

( P − ZP 1−P

N�

, P + ZP 1−P

N�

)

Appendix IIPlan Provisions

§ Annuity = $800 × Years of Service§ Retirement Age: normal 65, early 55§ Vesting: 100% after 5 years of service

Assumptions§ Pre-retirement rates§ Investment return: 7.5%§ Mortality: age 80

Appendix IIIPresent Value of Pension Payments for One Participant:

where i: investment returnt: retirement yearx: age at tyx: average years of service for age x group

$800 &yx & an'|∙ v2017−t

Avg yrsof service Age Assumption

ratesActive in

'18Still active

'18Act-ret

'18 Liability

21.20 55 5% 44 42 2 $384,199

17.75 56 5% 41 39 2 $296,320

21.98 57 5% 33 32 2 $293,920

21.14 58 5% 38 36 2 $317,287

23.77 59 5% 48 46 2 $446,273

22.75 60 5% 47 44 2 $401,694

21.85 61 5% 34 32 2 $276,906

24.58 62 20% 24 19 5 $843,328

23.06 63 20% 21 17 4 $673,370

25.94 64 20% 14 12 3 $508,162

26.55 65 100% 4 0 4 $697,684

Appendix IV