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Arizona State Retirement System
Presentation to the Government Finance Officers
Association of Arizona
January 7, 2011
Arizona State Retirement System
• State of the ASRS Fund
• Current Legislative Action
• ASRS Cost Savings Initiatives
• Termination Incentive Programs
Arizona State Retirement System
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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Arizona State Retirement System
Arizona State Retirement System
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
Arizona State Retirement System
• $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
Arizona State Retirement System
• 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%
Arizona State Retirement System
Legislative Update
Arizona State Retirement System
• Alternate contribution rate for return to work retirees
• Administrative initiatives
Arizona State Retirement System
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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Arizona State Retirement System
Termination Incentive Plans
Arizona State Retirement System
• 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
Arizona State Retirement System
• 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
Arizona State Retirement System
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
Arizona State Retirement System
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
Arizona State Retirement System
Questions?
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