Presentation on theme: "State Teachers Retirement System of Ohio"— Presentation transcript:
1State Teachers Retirement System of Ohio Public Sector PlansSherry S. Chan, ASA, MAAAChief ActuaryState Teachers Retirement System of Ohio
2Introductions Sherry Students OSU Towers Perrin, MetLife, STRS Ohio Why actuarial science?What kind of actuary?
3What is a Public Sector Plan? Plan for government employeesState and local employeesMilitary employees/Armed forcesFederal civil servantsTeachersUniformed Officers
4Ohio Public Sector Plans WebsiteActuaryParticipantsFull RetirementFiscal YearAssetsOPERSopers.orgGRS936k30+out12/31$59.3bSTRSstrsoh.orgPwC476k6/30$70.8bOP&Fop-f.orgBuck53k48+25$12.4bSERSohsers.orgCM189k$11.2bOHPRSohprs.org3k$0.8b
5Defined Benefit vs. Defined Contribution Defined Benefit (DB)Benefits are definede.g. 1% of Final Salary times Years of ServiceContributions to fund benefits are not definedDefined Contribution (DC)Contributions to fund benefits are definedBenefits upon retirement are not definedFunction of contribution, investment earnings, management fees, etc.
6Benefit Features of Public Plans Employee contributions are commonCan’t reduce future DB accruals for current employeesOften provide subsidized early retirement benefitsService caps are commonMost provide automatic or ad hoc COLAsLonger vesting schedulesSome allow members to purchase service creditsSome not subject to Social SecurityLess stringent regulationsPLOPDROP
7PLOP Partial Lump-Sum Option Plan Designed as an extra benefit to retireesHow it worksAllows participants to take an amount equal to “x” times the monthly single life annuity benefit in a lump sum at retirementMonthly benefits still begin at retirement date and are payable for life, but are reduced to reflect the amount taken in a lump sum
8STRS PLOP Homework www.strsoh.org Publications Under “Brochure Series,” find PLOPComplete worksheet on p.5 of 11, assuming:Kindergarten teacher Mrs. Taylor started teaching immediately after obtaining her masters degree in child education and will retire upon reaching 30 years of service at age 55.Final average salary for Mrs. Taylor is $75,000. She incurred a 80% replacement ratio so her final annual retirement benefit is $60,000.Mrs. Taylor fell in love with a foreclosure home on a golf resort in Florida costing only $189,500. Mrs. Taylor wants to pay for this house in full using as much as possible from her PLOP.Mrs. Taylor wants to receive remaining retirement benefits in the form of a single life annuity to help pay for green fees and monthly resort fees.
9DROP Deferred Retirement Option Plan Designed to keep experienced employees who are eligible to retire earlyHow it worksBenefit frozen on elected DROP datePayments accumulate in a tax-qualified fund accumulating interestMember receives LS balance on their actual retirement dateMember doesn’t continue to accrue benefits while on DROP
10OP&F DROP Homework www.op-f.org Members DROP Information Member’s Guide to DROPCalculate Fireman Taylor’s DROP benefit chart, assuming:Mr. Taylor became a fireman right out of high school at age 18 and will retire with unreduced benefits at age 48.Mr. Taylor’s final average annual salary immediately before DROP election is $45,000 and will incur a 2.5% annual salary growth during the 8 years he will be in DROP.