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Sherry S. Chan, ASA, MAAA Chief Actuary State Teachers Retirement System of Ohio.

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Presentation on theme: "Sherry S. Chan, ASA, MAAA Chief Actuary State Teachers Retirement System of Ohio."— Presentation transcript:

1 Sherry S. Chan, ASA, MAAA Chief Actuary State Teachers Retirement System of Ohio

2  Sherry  OSU  Towers Perrin, MetLife, STRS Ohio  Students  Why actuarial science?  What kind of actuary?

3  Plan for government employees  State and local employees  Military employees/Armed forces  Federal civil servants  Teachers  Uniformed Officers

4 PlanWebsiteActuaryParticipantsFull Retirement Fiscal Year Assets OPERSopers.orgGRS936k30+out12/31$59.3b STRSstrsoh.orgPwC476k30+out6/30$70.8b OP&Fop-f.orgBuck53k48+2512/31$12.4b SERSohsers.orgCM189k30+out6/30$11.2b OHPRSohprs.orgGRS3k48+2512/31$0.8b

5  Defined Benefit (DB)  Benefits are defined  e.g. 1% of Final Salary times Years of Service  Contributions to fund benefits are not defined  Defined Contribution (DC)  Contributions to fund benefits are defined  Benefits upon retirement are not defined  Function of contribution, investment earnings, management fees, etc.

6  Employee contributions are common  Can’t reduce future DB accruals for current employees  Often provide subsidized early retirement benefits  Service caps are common  Most provide automatic or ad hoc COLAs  Longer vesting schedules  Some allow members to purchase service credits  Some not subject to Social Security  Less stringent regulations  PLOP  DROP

7  Partial Lump-Sum Option Plan  Designed as an extra benefit to retirees  How it works  Allows participants to take an amount equal to “x” times the monthly single life annuity benefit in a lump sum at retirement  Monthly benefits still begin at retirement date and are payable for life, but are reduced to reflect the amount taken in a lump sum

8   Publications  Under “Brochure Series,” find PLOP  Complete 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.

9  Deferred Retirement Option Plan  Designed to keep experienced employees who are eligible to retire early  How it works  Benefit frozen on elected DROP date  Payments accumulate in a tax-qualified fund accumulating interest  Member receives LS balance on their actual retirement date  Member doesn’t continue to accrue benefits while on DROP

10   Members  DROP Information  Member’s Guide to DROP  Calculate 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.


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