p 3 actuaries you can understand 1 impact of richman initiative on fcera costs april 20, 2005 p
TRANSCRIPT
1P3 Actuaries you can
understand
Impact of Richman Initiativeon FCERA Costs
April 20, 2005
P
2P3 Actuaries you can
understand
Syllabus
• Closing Down a DB Plan– Changes in Amortizing UAAL
• Comparing Costs– Employer– Employee
• Costs Not Analyzed
3P3 Actuaries you can
understand
Plan Compensation
0
200
400
600
800
1,000
1,200
2004 2008 2012 2016 2020 2024 2028 2032
Mill
ion
s
Fiscal Year Beginning July
Do
llars
No New Entrants
With New Entrants
4P3 Actuaries you can
understand
Relative Size of Amortization Payments
2004 2008 2012 2016 2020 2024 2028 2032
Fiscal Year Beginning July
No New Entrants
With New Entrants
5P3 Actuaries you can
understand
Amortization of UAAL as a Percentage of Covered Payroll –
Regular Benefits
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
2004 2008 2012 2016 2020 2024 2028 2032
Year
Pe
rce
nt
of
Pla
n C
om
pen
sati
on
No New Entrants
With New Entrants
6P3 Actuaries you can
understand
Amortization of UAAL in Dollars – Regular Benefits
-10
-5
0
5
10
15
20
25
2004 2008 2012 2016 2020 2024 2028 2032
Mil
lion
s
Year
Do
llars
No New Entrants
With New Entrants
7P3 Actuaries you can
understand
Total Contribution in Dollars – Regular Benefits
0
20
40
60
80
100
120
140
160
2004 2008 2012 2016 2020 2024 2028 2032
Mil
lio
ns
Year
Do
llars
No New Entrants
With New Entrants
8P3 Actuaries you can
understand
Amortization of UAAL as a Percentage of Covered Payroll –
Settlement Benefits
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2004 2008 2012 2016 2020 2024 2028 2032
Year
Pe
rce
nt
of
Pla
n C
om
pe
nsa
tio
n
No New Entrants
With New Entrants
9P3 Actuaries you can
understand
Amortization of UAAL in Dollars – Settlement Benefits
0
5
10
15
20
25
2004 2008 2012 2016 2020 2024 2028 2032
Mill
ion
s
Year
Do
llars
No New Entrants
With New Entrants
10P3 Actuaries you can
understand
Total Contribution in Dollars – Settlement Benefits
0
10
20
30
40
50
60
70
2004 2008 2012 2016 2020 2024 2028 2032
Mill
ion
s
Year
Do
llars
No New Entrants
With New Entrants
11P3 Actuaries you can
understand
Total Contribution in Dollars – All Benefits
0
50
100
150
200
250
2004 2008 2012 2016 2020 2024 2028 2032
Mill
ion
s
Year
Do
llars
No New Entrants
With New Entrants
12P3 Actuaries you can
understand
Total Contribution in Dollars – All Benefits
0
50
100
150
200
250
2004 2008 2012 2016 2020 2024 2028 2032
Mill
ion
s
Year
Do
llars No New Entrants
With New Entrants
With 9% DC
13P3 Actuaries you can
understand
Total Employee Contribution in Dollars – Regular Benefits
0
10
20
30
40
50
60
70
2004 2008 2012 2016 2020 2024 2028 2032
Mill
ion
s
Year
Do
llars
No New Entrants
With New Entrants
14P3 Actuaries you can
understand
Total Employee Contribution as a Percent of Covered Payroll –
Regular Benefits
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2004 2008 2012 2016 2020 2024 2028 2032
Year
Pe
rcen
t o
f P
lan
Co
mp
ensa
tio
n
No New Entrants
With New Entrants
15P3 Actuaries you can
understand
Costs Not Analyzed
• For new DC plan:– Death Benefits– Disability Benefits
16P3 Actuaries you can
understand
Unintended Consequences
• Employee turnover– Switching to another public agency will be
less attractive– Lower turnover for current employees
• Results in higher costs
17P3 Actuaries you can
understand
Unintended Consequences
• Pay Levels– Recruiting experienced employees will be
more difficult– Relative pay structure will need to remain
intact– Pay levels may need to increase to fill
positions– Pay level for other positions may increase
to maintain balance
18P3 Actuaries you can
understand
Unintended Consequences
• Plan Investments– Contribution rates are more volatile in
closed plans– Mature plans are hurt more by bad
investment years– Investments are likely to be adjusted to
reduce risk– Reduced risk generally means reduced
investment return
19P3 Actuaries you can
understand
Questions